S. HRG.

109389

MEETING THE CHALLENGES OF MEDICARE DRUG

BENEFIT IMPLEMENTATION

HEARING
BEFORE THE

SPECIAL COMMITTEE ON AGING

UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION

WASHINGTON, DC

FEBRUARY 2, 2006

Serial No. 10917

Printed for the use of the Special Committee on Aging

(
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON

27432 PDF

2006

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 5121800; DC area (202) 5121800
Fax: (202) 5122250 Mail: Stop SSOP, Washington, DC 204020001

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00001

Fmt 5011

Sfmt 5011

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

SPECIAL COMMITTEE ON AGING

GORDON SMITH, Oregon, Chairman
RICHARD SHELBY, Alabama
HERB KOHL, Wisconsin
SUSAN COLLINS, Maine
JAMES M. JEFFORDS, Vermont
JAMES M. TALENT, Missouri
RON WYDEN, Oregon
ELIZABETH DOLE, North Carolina
BLANCHE L. LINCOLN, Arkansas
MEL MARTINEZ, Florida
EVAN BAYH, Indiana
LARRY E. CRAIG, Idaho
THOMAS R. CARPER, Delaware
RICK SANTORUM, Pennsylvania
BILL NELSON, Florida
CONRAD BURNS, Montana
HILLARY RODHAM CLINTON, New York
LAMAR ALEXANDER, Tennessee
KEN SALAZAR, Colorado
JIM DEMINT, South Carolina
CATHERINE FINLEY, Staff Director
JULIE COHEN, Ranking Member Staff Director

(II)

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00002

Fmt 5904

Sfmt 5904

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

CONTENTS
Page

Opening Statement of Senator Gordon Smith .......................................................

Opening Statement of Senator Herb Kohl .............................................................
Opening Statement of Senator Elizabeth Dole .....................................................
Opening Statement of Senator Thomas Carper ....................................................
Opening Statement of Senator Bill Nelson ...........................................................
Opening Statement of Senator Hillary Clinton .....................................................
Opening Statement of Senator James Talent .......................................................
Opening Statement of Senator Ken Salazar .........................................................
Prepared Statement of Senator Conrad Burns .....................................................
Opening Statement of Senator Conrad Burns ......................................................
Opening Statement of Senator Rick Santorum .....................................................
Prepared Statement of Senator Blanche Lincoln ..................................................

1
3
4
6
7
8
10
11
12
13
13
87

PANEL I
Mark B. McClellan, M.D., administrator, Centers for Medicare and Medicaid
Services, Department of Health and Human Services, Washington, DC ........
Linda McMahon, Operations, Social Security Administration, Washington, DC

15
51

PANEL II
Robert J. Kenny, Medicare Part D beneficiary, Tillamook, OR ...........................
Michael Donato, Medicare Part D beneficiary, Mansfield, OH ............................
Sharon Farr, Center for Individual and Family Services, Mansfield, OH ..........

89
95
99

PANEL III
Timothy R. Murphy, secretary, Executive Office of Health and Human Services, Massachusetts Department of Public Health, Boston, MA ......................
Susan Sutter, president-elect, Pharmacy Society of Wisconsin, Horicon, WI; ....
Mark B. Ganz, president and chief executive officer, Regence Group, Portland,
OR; on behalf of the National Blue Cross and Blue Shield Association ..........

107
119
129

APPENDIX
Prepared Statement of Senator Larry Craig .........................................................
Prepared Statement of Senator Susan Collins ......................................................
Prepared Statement of Senator Russell Feingold .................................................
Prepared Statement of Senator Rick Santorum ....................................................
Article submitted by Senator Santorum ................................................................
Prepared Statement of Senator Mel Martinez ......................................................
Questions from Senator Santorum for Robert Kenny ...........................................
Questions from Senator Santorum for Susan Sutter ............................................
Testimony submitted by Long-Term Care Pharmacy Allicance ..........................
Statement submitted by National Association of Chain Drug Stores .................
Statement submitted by American Society of Health System Pharmacists .......
Statement of the American Psychaitric Association .............................................
Statement submitted by AARP ...............................................................................
Statement submitted by the American Pharmacists Association ........................
Testimony of Jack Vogelsong, Commonwealth of Pennsylvania, Department
of Aging .................................................................................................................
Testimony of Kenneth Goodman, chief operating officer, Forest Laboratories ..

139
139
140
141
143
144
144
144
146
150
158
165
169
177
185
194

(III)

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00003

Fmt 5904

Sfmt 5904

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00004

Fmt 5904

Sfmt 5904

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

MEETING THE CHALLENGES OF MEDICARE

DRUG BENEFIT IMPLEMENTATION
THURSDAY, FEBRUARY 2, 2006

U.S. SENATE,
SPECIAL COMMITTEE ON AGING,
Washington, DC.
The committee convened, pursuant to notice, at 10:03 a.m., in
room 216, Hart Senate Office Building, Hon. Gordon H. Smith
(chairman of the committee) presiding.
Present: Senators Smith, Talent, Dole, Martinez, Santorum,
Burns, Kohl, Wyden, Lincoln, Carper, Nelson, Clinton, and Salazar.
OPENING STATEMENT OF SENATOR GORDON SMITH,
CHAIRMAN

The CHAIRMAN. Ladies and gentlemen, if everyone would take

their seats, we welcome you all here. We thank you for coming.
This is our first hearing in the Aging Committee of the year 2006
and there is hardly a topic we could address that is more timely
and more important to the lives of our seniors than the new prescription drug benefit. Obviously, it has gotten a lot of peoples attention as it has been implemented. It has not been problem-free,
but this is not a hearing just to pile on. It is a hearing to look for
solutions, so we appreciate very much our witnesses who have
taken the trouble to be here and we want you to feel at home here.
I understand some are feeling quite nervous about this. But this
is a great national effort to fill a part of the Medicare promise that
should have been done long ago.
But again, our goal today is to evaluate CMSs ability to address
current problems in a timely manner and to anticipate future problems before they occur. Only when this happens can we regain and
earn the confidence that beneficiaries want to have in this valuable
program.
It is most unfortunate that many of the problems have involved
what are known as dual-eligibles, which are people who are on
Medicaid, which is a State responsibility, and now have been shifted to Medicare, which is a Federal responsibility. These are often
the poorest and most vulnerable Americans who rely on medications to manage their chronic physical and mental illnesses. We
knew there would be challenges associated with their transition
from Medicaid into the new Medicare drug benefit, but it seems
that perhaps not enough was done to ensure a seamless transition.
Last March, this committee held a hearing where experts offered
solutions to the very problems the program has experienced. I felt
their recommendations had merit, strongly enough so that Senator
(1)

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00005

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

2
Kohl and I sent a follow-up letter to CMS. While I applaud CMSs
efforts to address the current situations and problems that have
arisen, I have to question whether any of this would have developed if the recommendations we made had been adopted.
However, again, let us look forward. I hope to have answers to
a number of key questions. First, is the accurate enrollment information about dual-eligibles available to plans and pharmacists to
ensure beneficiaries can receive their medications at correct prices?
Second, have the call center hold times improved so that beneficiaries and pharmacists can get access to accurate information in
a timely manner and resolve problems? Third and finally, are lowincome beneficiaries still being denied drugs or charged inappropriate deductibles and copayments?
I know that progress is being made to improve communication
between all parties, but I am hearing reports that not all plans and
pharmacies are aware of the options to address problems. This is
certainly the case with what is called the first fill policy, which requires plans to cover the cost of a 30-day emergency supply of
medication when a beneficiary needs a drug that is not covered by
his or her formulary. While all plans reportedly had first fill policies in place on January 1, many pharmacists and plan representatives were not aware of them, and even if they were, they couldnt
get the authorization necessary to dispense the drug.
I want to note and commend my own State that took action and
created stop-gap programs to pay the cost of emergency medications. I am committed to ensuring that States are reimbursed for
their expenses. Again, Medicare is a Federal, not a State, program.
While the focus of this hearing is on the immediate challenges
associated with the implementation of the Medicare drug benefit,
there are some programmatic changes that are needed. One such
change is the extension of the institutional copayment exemption
to dual-eligible beneficiaries who are receiving care in homes and
community-based centers. Under current law, dual-eligibles who reside in nursing homes are not required to pay copayments for generic or brand name drugs. However, those living in assisted living
facilities or who receive services through adult day care programs
or other types of community-based services are required to pay
these costs.
Considering that dual-eligible beneficiaries in both nursing home
and community-based care settings generally have the same
amount of resources available to them. This is simply not right. It
put dual-eligibles in States like Oregon, which provide most of
their long-term care services in a community setting at a disadvantage and may even create a disincentive for individuals to choose
community-based care options in the future. By the way, some of
those options are less expensive than nursing homes, but my point
is simply that the seniors should have the choice of where they receive their care.
Yesterday, I introduced a bill along with Senator Bingaman that
would extend the copayment exemption to dual-eligibles receiving
their care in home or community-based settings. I believe this
small change to the Medicare drug program will have an enormous
impact to ensuring that low-income beneficiaries have continued
access to their drugs while protecting their right to receive care in

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00006

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

3
the setting of their choice. I hope my colleagues will consider this
bill. I think it is an improvement.
I look forward to todays discussion and I hope we have a
thoughtful and productive dialog. I am proud of the Aging Committee. We are the first to take up this issue and I know it is of
real timely urgency for seniors. We have excellent witnesses, including two beneficiaries who will discuss the success and challenges associated with the programs implementation.
With that, I will turn to my colleague, Senator Kohl, for his
opening remarks.
OPENING STATEMENT OF SENATOR HERB KOHL

Senator KOHL. I thank you, Mr. Chairman, and I also welcome

our witnesses who will be here today.
Dr. McClellan, I am glad to see you back again to discuss Medicare Part B implementation. As I am sure you know, we have some
serious problems on our hands, and as I am sure we would agree,
we need to put aside any partisan thoughts to work together to get
this program running so that seniors are better off than they were
before we passed the drug benefit. I do not believe we are there at
this time.
Every day, we hear stories from seniors and individuals with disabilities. Some find themselves switched from Medicaid into a
Medicare drug plan that does not cover the drugs that they need.
In other States, hundreds of dollars of incorrectly charged copays.
Still others wrestle with the choice between the dizzying number
of drug plans, all covering different drugs and different costs, and
few that Medicare can explain in any detail.
A good number of these problems, I think you would agree, come
from a flaw in the original plan, the primary reason that I and others voted against it in 2003. Medicare Part D is not what many
seniors thought they were promised, a simple drug benefit delivered through the reliable, popular Medicare program. Instead, private insurers distribute the drug benefit, and I believe it is set up
as much for their profit and convenience as it is for that of our seniors.
Nowhere is that more obvious to me than in the provisions of the
drug benefit law that prohibits, as you know, the Federal Government from negotiating with drug companies for lower drug prices.
Forty-one million Medicare beneficiaries demanding fair prices, I
believe could have backed the drug companies down, but the law
will not let them even try.
Striking that provision, and I am a cosponsor of legislation to do
that, I believe might be the single most powerful action we can
take to increase the popularity and the benefit of Medicare Part D
among seniors. I would hope that the administration would endorse
fixing that provision. I believe it would not only be good policy, but
a strong signal that seniors are, indeed, our primary concern.
I would bet that, Dr. McClellan, you are as disappointed as anyone at the troubled roll-out of Medicare Part D. Seniors dont have
enough information, as you know, to choose a drug plan and they
get inaccurate or inconsistent advice when they call Medicare. Senator Nelson has introduced a bill that would extend the enrollment
deadline from May 15 and give every beneficiary a chance to

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00007

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

4
change their plan at least once at any point in 2006, and that
seems to me something that we could and should do.
We also have to take immediate action to help those hit hardest
so far, the so-called dual-eligibles, the very poorest and sickest seniors and disabled individuals who were switched to the Medicare
drug benefit on January 1. We hear stories of patients denied medicines because their paperwork is delayed or their new plan does
not cover what they need. We know the Administration must be as
concerned as we are with that result and we look forward to talking about what we can do to turn it around.
But it is not only seniors who are overwhelmed. Pharmacies, as
you know, are struggling to navigate the new system. Today, we
will hear from Sue Sutter, a pharmacist from Dodge County, WI,
about the extreme steps they have taken to make sure that no patient is turned away. Even in the face of being unable to verify payment, many pharmacists have still dispensed medications to their
clients and some pharmacies have been forced to the extreme of
taking out lines of credit to cover their costs. Many States, including Wisconsin, have had to step in to cover drugs, as you know, to
avert a public health emergency.
I believe we can act now to fix these problems. Dual-eligibles
must have guaranteed access to the drugs they need and some real
help to get into the proper drug plan. The Federal Government
must reimburse seniors, pharmacies, and States who have stepped
in to fill the holes. We should extend the enrollment deadline for
seniors to sign up for the benefit so that they would have enough
time to pick the drug plan that best suits their needs, and we
should also let seniors change their drug plans this year if the one
they choose changes mid-year and no longer provides coverage for
their drug. We should also allow, as I said, Medicare to negotiate
directly with drug companies for lower prices for seniors and taxpayers if we cannot explain why they should be disallowed from
doing that.
Earlier this week, I met with seniors, individuals with disabilities, pharmacists, and advocates in Milwaukee who have been
working around the clock to help people get the drugs they need.
The administration needs to show that same commitment and
must look at what can be done to rectify the problems that exist
with Medicare Part D.
Again, I thank you all and I certainly thank our Chairman for
holding this important hearing.
The CHAIRMAN. Thank you, Senator Kohl.
As is our tradition, we will go on those who arrived first, so it
is Senator Dole, Senator Carper, Senator Nelson, Senator Clinton,
and Senator Talent.
OPENING STATEMENT OF SENATOR ELIZABETH DOLE

Senator DOLE. Thank you very much. Thank you, Chairman

Smith, for holding this hearing to examine and address the challenges in implementing the new Medicare prescription drug program.
Twenty-four million Americans, including more than 778,000
North Carolinians, are enrolled in Medicare Part D, and today,
these folks are receiving more affordable access to life-saving medi-

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00008

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

5
cation. For a majority of these individuals, the program is working
properly and they are receiving their prescriptions at a much lower
cost than before. In fact, pharmacies across the Nation are filling
one million prescriptions a day to Medicare Part D enrollees.
However, there are some beneficiaries, in many cases the neediest among us, who are having considerable trouble transitioning
into the new program. This is simply unacceptable and clearly not
what was intended. It is critical that we identify these problems
and work together to ensure that this new program serves each
and every beneficiary successfully.
I have heard from a number of pharmacists, providers, and beneficiaries in my home State of North Carolina about both the successes and challenges they have encountered in the first month of
the new Medicare drug program. While I am delighted to hear that
so many Americans who did not have prescription drug coverage
before are now benefiting from this program, I am also very concerned about those who are encountering obstacles as they try to
fill their prescriptions.
I have heard reports, as I am sure we all have, about beneficiaries who are being charged the wrong copayment, pharmacists
and beneficiaries who are not able to get in touch with the plans,
and computer systems that are working inadequately. What is
worse is that in many cases, it is the dual-eligible individuals,
those who qualify for both Medicare and Medicaid benefits, and the
low-income subsidy populations, that are having the most trouble.
Because these beneficiaries often have more serious health concerns and depend on their prescription drugs the most, it is even
more important that these problems be addressed quickly.
The new Medicare prescription drug plan is the largest change
to Medicare since the programs creation 40 years ago, and with
any change that scale, that magnitude, it is nearly impossible to
avoid startup challenges. But now we have got to identify those individuals who are vulnerable and make certain their needs are
met. We have got to make certain that the new drug program is
working for all beneficiaries, pharmacists, and providers alike.
We have already seen tremendous progress in solving some of
the initial difficulties. Data submissions have been streamlined.
Customer services have been enhanced. Pharmacy support has
been expanded. I thank Dr. McClellan and CMS for taking steps
to quickly improve the systems that were faltering and to assist
those experiencing problems. I also thank the many pharmacists,
providers, case workers, State and Federal officials, friends and
family members who are working together to assist beneficiaries in
their community.
I am disappointed by the unconstructive rhetoric and blame
game that some are resorting to. We must work together, not point
fingers, to solve these problems.
In conclusion, let me just say that in the coming days and weeks,
it is vital that all parties involved continue to make a concerted effort to strengthen the new Medicare drug program. Congress must
ensure that diligent work is being done to meet the needs of every
beneficiary. Millions of Americans are better off, thanks to the benefits provided by this landmark program, and there is no reason
why every enrollee should not share the same experience.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00009

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

6
Thank you, Mr. Chairman.
The CHAIRMAN. Thank you, Senator Dole.
Senator Carper.
OPENING STATEMENT OF SENATOR THOMAS CARPER

Senator CARPER. Thank you. I want to welcome our witnesses

today. Thank you very much for joining us. It is good to see both
of you and I express my thanks to you, Mr. Chairman, and to our
colleague, Senator Kohl, for pulling us together so that we can
begin to exercise our responsibility and our oversight responsibility
as this new benefit is implemented.
We all know, it has already been said, the implementation process has been bumpy, rocky. Maybe it was difficult given the magnitude of the kind of program that we are introducing here. I voted
for this benefit in the expectation that we would make improvements and as a first step toward ensuring that all seniors and disabled persons have access to prescription drug coverage under
Medicare. However, this is only going to work if we continue to improve the programs implementation almost on a daily basis, and
I know that is what you are trying to do and that is what we are
trying to do in my State of Delaware.
I just say to my colleagues, I think maybe it is going a little bit
easier in Delaware. We had our tough moments and still have
them, but we have an extraordinary cooperation between State and
local folks, working with CMS, working with Social Security, working with folks in the private sector to try to smooth it out as best
we can.
I know we have all heard how confusing this program is and
about the transition problems that are associated with the new
benefit. Some beneficiaries have gone, as we know, without needed
medications. Pharmacists have dispensed medications they have
not been paid for. Medicare and health plan phone lines have been
overwhelmed, such that resolution of these problems are even
harder to come by.
In my State of Delaware, we have done, as I said, I think a pretty good job of trying to implement the process and a lot of people
have worked very hard to make that possible. I think we have been
able to avoid the worst, but for a lot of people, there has been a
lot of heartache, as you know. Now we have got to sort through the
problems that we see and we have to fix them.
I am going to suggest several steps. The first one would be that
the Centers for Medicare and Medicaid services must address as
quickly as possible all the many problems that you have heard
about and that we have heard about in this past month or so. This
includes that States, that pharmacists and beneficiaries are appropriately compensated for costs that they have incurred as a result
of transition problems, and CMS should provide Congress with regular updates on the progress of resolving these issues, and this is
an opportunity to provide one update in person. We hope that others would follow.
Second, I believe we will need to streamline and simplify the
benefit. As it stands now, CMS, I believe, approved too many plans,
each one with different rules, different standards for pharmacists,
different standards for appeal. Put quite simply, the program as

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00010

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

7
implemented today is just too confusing. I will remember for a long
time a conversation I had with Senator John Breaux and former
Secretary Tommy Thompson a year or two before the adoption of
the program and talking to them about my mother, about their
mothers and how difficult this stuff is going to be for them to understand on a very good day. What we have done is we have put
in place a program that is, for a lot of our senior citizens, almost
incomprehensible.
Third point, we need to ensure that CMS has the proper structures in place to oversee participating health plans. CMS must ensure the plans are doing what they are supposed to be doing and
that any lack of compliance is immediately identified and corrected.
Finally, we need to ensure that the Social Security Administration continues to conduct outreach to low-income populations.
Today, I think only about a million people have been found eligible
for the subsidy out of an estimated, I think, eight million people
who are believed to be eligible beneficiaries.
I just say in conclusion, we can do better with this drug benefit
and I hope that todays hearing is a real good step toward fixing
some of the problems that we have all experienced and worked to
correct.
Thanks, Mr. Chairman.
The CHAIRMAN. Thanks, Senator Carper.
Senator Nelson, how are we doing in Florida?
OPENING STATEMENT OF SENATOR BILL NELSON

Senator NELSON. Well, you can imagine with the significant senior citizen population we have in our State, and Mr. Chairman, I
will be very brief and just summarize because you all have a tough
job and you need to know what we are hearing and it has been said
here.
We are going to have an opportunity to vote on this today, on one
of the things that has already been mentioned here. The Chairman
has mentioned it. I have filed an amendment on the tax reconciliation bill that will delay for 6 months the deadline of signing up
that will help a lot of the folks that I have been talking to who are
quite confused with over 43 plans to choose from. They are not only
confused, they are frightened because of that deadline coming and
if they make a mistake. So that is a part of the amendment, as
well, that they would have the opportunity to change that without
having to wait a year.
Now, you have also heard the commentary here about the dualeligibles. I will tell you, your attention is riveted in a town hall
meeting when senior citizens are sitting or standing in front of you
and literally tears are coming down their face because they had
their prescriptions under Medicaid and now the pharmacist is refusing to give it to them as they have been transferred under Medicare.
Then the third thing that I would just quickly mention is that
Senator Clinton and I filed a bill last week, and I just heard you
say, Mr. Chairman, that you filed one, as well, and this is prescription drug copayments in those that are in assisted living facilities.
Now, if you are low-income nursing home, you dont have to pay
the copayments. But if you are low-income and you happen to be

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00011

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

8
in assisted living facilities, and it may be that you are there because you have got a mental problem and the medications are absolutely essential, you see the problem. They are not getting their
medication. Senator Clinton and I have filed a bill that would cancel those copayments for low-income individuals.
Good luck as you are implementing this with everything that we
are seeing come up to the top.
The CHAIRMAN. Maybe we should combine your bill with the bill
Senator Bingaman and I introduced. Senator Clinton.
Senator NELSON. The more the merrier.
OPENING STATEMENT OF SENATOR HILLARY CLINTON

Senator CLINTON. Mr. Chairman, we would certainly welcome

that and we will work together, because that is one issue that must
be fixed immediately. I have been in pharmacies from Buffalo to
Rochester to Syracuse to New York City. I have been to hospitals.
I have spoken with many pharmacists, doctors, nurses, seniors,
people with disabilities, their family members, their advocates. Because I worried that the bill itself was fatally flawed in its design,
I voted against it, but once it passed, I certainly determined that
I would try to do everything I could to make sure that New Yorkers
understood it, could access it, and make the best of it.
To that end, I issued in our State a brochure that my excellent
staff put together. We have sent out tens of thousands of these in
English and Spanish. But as the date approached for the January
1 implementation, I became even more concerned and introduced
legislation to try to fix some of these problems that I was convinced
were going to happen.
The GAO came out with a report that highlighted and really set
off the alarms about a number of these problems, and yet despite
the concerns of many about what was going to happen, we were unsuccessful in either slowing down the process or making it work
better and the results are the ones that I have seen firsthand over
the last several weeks in my State, and I have to identify completely with what both Senator Kohl and Senator Nelson have said.
I mean, it is an absolute embarrassment, outrage, deep heartbreaking disappointment to be in the presence of people who are
so distraught, confused, upset and feeling abandoned.
I know any program is difficult, but I would remind us we implemented the entire Medicare program in 11 months back in 1965,
and we didnt have computers. We had a simple program people
could understand and an effective effort to make sure it came into
being as smoothly as possible.
Now, the first thing, Mr. Chairman, I would suggest is that we
get some agreement on the facts here, because we cannot possibly
deal with what we as elected representatives are coping with,
which is an overwhelming outpouring of constituent requests, unless we know the facts. I think it is important to start with the fact
that the administration continues to claim that we have 24 or 25
million beneficiaries. Let us look at those figures.
First, the 6.2 million dual-eligibles already had prescription drug
coverage. They were covered by Medicaid. They got their drugs.
Most of them got it for free. It was seamless. Their doctors understood how to access it for them. Four-point-five million Medicare

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00012

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

9
Advantage enrollees had Medicare managed care plans that offered
prescription drug coverage. They already were covered. Sevenpoint-four million retirees already had coverage from their previous
employers for their drug needs. Federal retirees, veterans and their
families, 3.1 million, already had existing drug coverage. So we
have about 3.5 million new enrollees in our country who signed up
for the new benefit.
In New York, we only have 110,000 new beneficiaries, and who
can blame them? People are taking a wait-and-see attitude. They
dont want to be signed up with some plan that may not even have
their drug on the formulary. Their doctors are telling them, wait.
Dont rush into this, because I dont want to have to be rediagnosing you. You have been fine on the drugs that I have given you
for a decade. I dont want to have to write notes and ask for permission to give you the drug that I think you should have. So people are taking a wait-and-see attitude, except for the dual-eligibles,
who were automatically enrolled, who had no choice over what the
plan they were going into said or what kind of copayments they
would be required to make.
So I think that we need to have, as the first order of business,
an agreement that we are going to talk about facts, not spin, not
rhetoric, not propaganda. We are going to talk about facts because
peoples lives are at stake, and I take this very seriously.
There are a number of fixes that we have been putting together
on both sides of the aisle. One, you heard about. The Chairman,
Senator Nelson, and I, we would like to make sure that the dualeligibles living in group homes, in assisted living facilities, like a
young man that I met recently outside of Albany had a bill for the
first time ever that he was supposed to pay to get the drugs he
needed will not have to face that.
Second, I would like to see the pharmacists in this country reimbursed. They have been on the front lines. They have been the ones
who have had to tell customers, I am sorry, this isnt covered, or,
Mrs. Jones, I know you used to get your drugs for free, but now
you are going to have to pay me $42. Oh, you cant pay? Well, I
am going to give it to you anyway and we will try to get this
worked out. They are the ones who have been on hold to the Medicare hotline or to the plans hotline, trying to get answers for their
customers about what they were entitled to and how much it was
going to cost them. So I certainly hope we will reimburse the pharmacists.
With respect to the recent announcement about reimbursing the
States, let us make sure that that is not cutoff at February 15 because I dont think a lot of these problems are going to be fixed by
February 15, and I dont think any State that has stepped up to
the plate, as so many of ours have, should be penalized because the
Federal Government designed a fatally flawed plan and is implementing it in a manner less than acceptable.
Now, I also am deeply concerned about the large numbers of
beneficiaries with mental illnesses who have had trouble getting
their medications. Now, as beneficiaries finish their one-time transition supplies of medications not covered on drug plan formularies,
they will have to switch medications or file for an exception to the
plans formulary policies, and I predict this will be the next big

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00013

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

10
challenge, Dr. McClellan, that will be faced by the Part D program,
as millions of beneficiaries try to take advantage of the exceptions
and the appeals process, and I hope you have plans in place, and
I would request that your agency provide this committee with data
on the numbers of beneficiaries who file appeals to plans, the number of successful appeals, and rejections by plans, and information
on the timeliness with which plans handle appeals.
Finally, there continue to be widespread reports of drug plans requiring prior authorization for beneficiaries to receive needed medications. Now, some reports have plans requiring forms for each
drug, while others are requiring doctors to fill out forms as long as
14 pages for drugs that a beneficiary has been taking for years.
Now, your agencys request that plans discontinue this practice
does not seem to be working based on the information we have, and
I hope that you will require, not request, require that the plans
cease this practice and enforce that requirement.
Mr. Chairman, we have legislation with a comprehensive fix that
I hope we can get bipartisan support on. I, for one, believe we
should scrap this and start over. We are spending hundreds of billions of dollars on an inefficient delivery of a plan that could be
done in a much more cost-effective way. We have taken taxpayer
dollars by the billions and transferred it to the pharmaceutical
companies and the insurance companies as a way to entice, even
bribe, them to provide drug coverage to the poorest of the poor and
the sickest of the sick. That is not in keeping with either our values or, frankly, what should be expected of high-performance government.
I look forward to getting responses, but I hope that we will start
with an agreement that no spin, no rhetoric, let us talk facts and
let us get facts before this committee so that we can discharge our
responsibilities to the people who are dependent on us.
The CHAIRMAN. Thank you, Senator Clinton.
We will now hear from Senator Talent, Senator Salazar, Senator
Burns, and Senator Santorum, and if you could keep them abbreviated, we would appreciate it. Our witnesses, three panels of
them, are waiting. Senator Talent.
OPENING STATEMENT OF SENATOR JAMES TALENT

Senator TALENT. I will be brief, Mr. Chairman. I have had a

number of town hall meetings around Missouri talking about this
new coverage and listening to seniors. It is the third round of town
hall meetings I had on prescription drug coverage. I have encountered in my time in public life many, many senior citizens who
were in a position where they were choosing between the necessities of life and prescription drugs because they had no coverage
because Medicare did not have prescription drug coverage as a
base, and that is not the case now. There are thousands of people
in the State of Missouri who were paying thousands of dollars out
of pocket a few months ago who are not paying that anymore and
that is a huge plus for the program.
But we have a lot of issues that we have to deal with, also, and
many Senators have mentioned that. I am looking forward to having the chance to ask you about that.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00014

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

11
I am concernedit is funny, because as I was thinking about this
and where we were going to have difficulties, I thought the autoenrollment process would probably go pretty well because we already had those people on the computers and I thought we would
just be able to shift them over. We have had 14,000 Missourians
for whom the auto-enrollment process failed. I appreciate your assurances that the State is going to get reimbursed. I want to make
certain that that happens.
I also have concerns from a pharmacists point of view about how
this is working out. I have heard from a lot of pharmacists in that
respect, and also issues in getting information from the plans as
people try and make choices about what plan that they are going
to pick.
I appreciate the fact that you are here today and I am going to
desist from any further statement and just ask that my opening
statement be put in the record.
The CHAIRMAN. Without objection.
Senator Salazar.
OPENING STATEMENT OF SENATOR KEN SALAZAR

Senator SALAZAR. Mr. Chairman and Ranking Member Kohl, I

very much appreciate the work you do on this committee and I very
much look forward to working with you, since this is my first meeting before this committee.
On the subject that we are dealing with here today, I know the
horror stories that we have heard all around the country. They are
no different at all in my State than some of the stories that have
been talked about here this morning already. In Colorado, we have
17 companies that are providing 42 plans to Medicare beneficiaries.
The implementation of the program has caused numerous people in
my State to come to me and to my other colleagues and to tell us
about the concerns that they have with the implementation of the
program.
In the first few days of the program, many of the pharmacies did
not have the correct information, and I saw and heard from people
who were trying to scrounge together money from friends and relatives to try to pay for prescriptions. Some of them were able to
do it. Some of them, frankly, had to go without.
I dont want to go over all the concerns that have already been
talked about by my colleagues, but there is one particular concern
that I do have that I want to reemphasize and that is the payments with respect to pharmacies that have been providing prescription drugs on a promise that they are going to get reimbursed
by the government. In my native San Luis Valley, there are perhaps one or two pharmacists in each of the six counties of my valley. These pharmacists are often the center of health care for the
community and especially for the elderly. When they see the elderly hurt, the pharmacists themselves hurt. I have heard from these
pharmacists who are paying the up-front costs of the CMS requirement that pharmacists must provide a 30-day supply of drugs to
dual-eligible beneficiaries and then to be paid back by the plan the
beneficiary is enrolled in. Placing the burden on these pharmacies
risks the livelihood of these small businesses. I urge CMS to ensure
that each of these pharmacists is paid quickly and accurately.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00015

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

12
Finally, I look forward to working on a bipartisan basis with the
members of this committee and the other members of the Senate
and Congress to try to make sure that we can take care of the
humongous problems that have been illustrated with respect to the
implementation of this program.
The CHAIRMAN. Thank you.
Senator Burns
Senator BURNS. I would ask that my full statement be put in the
record.
The CHAIRMAN. Without objection.
[The prepared statement of Senator Burns follows:]
PREPARED STATEMENT

OF

SENATOR BURNS

Today, as we discuss the implementation of the new Medicare drug benefit, I

think it is important to remember that this is an entirely new programbarely a
month old. Before it, drug coverage in the Medicare program was very limited. Seniors whose employers did not provide drug coverage could get it only through what
was then known as Medicare+Choice, through Medigap policies, or worse, would
have to go without coverage at all.
With that in mind, I voted for the new benefit. As of mid-January, over 24 million
seniors have been enrolled53,000 in Montana, with thousands more enrolling
every day. Millions of these Americans did not previously have any coverage, and
now they do. Of those who have enrolled, the vast majority are finding that the new
benefit covers the drugs they need and will save them money.
However, as we are all aware, the implementation has not gone smoothly in all
cases. Im sure that what I am hearing from my constituents in Montana is no different from what my colleagues on this committee are hearing.
I think that every state has had difficulties encountered by low-income dual eligibles. A number of states, as well as a number of pharmacies have stepped in to
cover the costs of providing these beneficiaries with needed medications.
Seniors are finding that the program is extremely confusing.
Some calls from pharmacies and seniors are put on hold for hours. Often this long
wait results in merely being given the opportunity to leave a message that is often
not returned.
Pharmacies, particularly small ones in rural parts of Montana, are extremely concerned that reimbursement is too low. We cannot afford to have these small pharmacies close in states like mine where beneficiaries often must travel great distances to get their drugs.
Finally, I am personally concerned about the limited efforts CMS is making to
reach out to rural and remote areas, most specifically on our Indian Reservations.
While many Native Americans were automatically enrolled at the beginning of the
year, many were not.
To date, I have heard of no efforts to reach out to Native Americans to explain
to them the importance of enrolling and assisting them with this process. In a state
the size of Montana, outreach to these remote areas is critical, and I am concerned
that CMS doesnt fully understand how much territory we have to cover out there.
We have not had as much success as I would like to see in getting eligible tribal
members signed up for Medicare in general, and I worry that the problem is worse
on the Part D program.
The result, I fear, is that many on the reservations will miss the deadline.
I am very concerned about all of these problems, and my office has been helping
hundreds of Montanans get the help they need from CMS to get enrolled.
However, these problems do not mean that this is a bad program or that Congress
must initiate wholesale legislative changes. I am concerned that some have seized
upon these difficulties in a cynical attempt to score political points. We must not
do this! Those that have already labeled the program a failure are only discouraging
seniors, who many need the help, from enrolling or even investigating their options.
Far too much is at stakepeoples lives are at stakeand I am unwilling to play
politics with the lives and health of our seniors.
To begin making drastic changes now risks exacerbating problems that can and
currently are being fixed by CMS. Our focus now should be ensuring that all seniors
who want to be enrolled get enrolled by May 15th.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00016

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

13
OPENING STATEMENT OF SENATOR CONRAD BURNS

Senator BURNS. This doesnt surprise me. This program is a

month old and we Americans are in this business that everything
has to be instanttea, coffee, everything that we doand we are
supposed to just go out there and have a new program, put it in
place, and all at once, it is perfect.
I would ask my colleagues that just throwing out a bunch of stuff
and try and help and get the program in place serves our purpose
and then we know what to fix. Right now, we dont know what to
fix, but I would tell CMS this. Your first manual that went out on
this was a bureaucrats dream, but it was a nightmare to seniors.
You had to have a lawyer and an accountant there with you to
work your way through it. About a third of ours are signed up and
we have got until May 15, and I think we should dedicate ourselves, both as elected representatives, to help put this program in
place because we have people now getting drugs that couldnt get
them before.
Yes, there is a lot of confusion out there because sometimes some
folks live on confusion. I would just ask, let us all get together and
make it work and then we know what to fix. When we are as old
as 11 months it took to put Medicare in place, we might see some
holes and we might find that this program might be a pretty good
program, that it might be working. But like Americans, we want
everything instantly. We want it to just pop up and do this when
you have got a lot of folks out there that are dual-eligibles. There
has already been a commitment made to the pharmacists that they
be reimbursed on the dual-eligibles and what they have been holding in limbo. That commitment has already been made, I think,
and I think we should bring that to light here.
We continue to get a lot of calls. We continue to work with our
resource centers and our offices to answer as many questions as we
possibly can. But just to come out here and throw up your hands
and say it is not going to do it, that we are going to start changing
it now, is not the correct approach to this. We may find that everything falls into place.
I voted for it and I know it is going to be costly, but I will tell
you, I have got people in Montanawe have just come back from
the National Prayer Breakfast and there Bono came up with a
great statement, and it applies to me in Montana in the same.
Where we live should not determine whether we live. So we have
some special needs in rural areas.
I would certainly advise everybody, let us make it work. Let us
find where the holes are. Then let us fix them, or let us make them
work on the ground. Thank you very much.
The CHAIRMAN. Thank you.
Senator Santorum.
OPENING STATEMENT OF SENATOR RICK SANTORUM

Senator SANTORUM. Thank you, Mr. Chairman, and I, too, appreciate your willingness to hold this hearing and to get to the bottom
of some of the problems and concerns. I think we need to take a
step back and say that it is a good thing that we are here.
For almost two decades, we have been trying to get a prescription drug program passed through numerous administrations,

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00017

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

14
through numerous Congresses, and we were not able to do it. We
were not able to find compromise, and with compromise comes a
meshing of a whole bunch of different ideas of how to do things
best and often you dont get the optimal solution. I think no one
who voted on the prescription drug bill that passed a couple of
years ago would have said that that was their optimal plan or this
was designed perfectly, from the Congress, I might add, but it was
the best we could accomplish given a very divided atmosphere here
in Washington, DC.
So it is somewhat remarkable to expect that something that is
the product of deep division, lots of haggling, lots of changes that
occurred throughout the legislative process, is going to result in a
perfect system that would be implemented without error. Those
who stand here and suggest that somehow or another that the
whole thing should be thrown out may have forgotten that it took
us 20 years to get the whole thing passed in the first place and
that just throwing it out would doom seniors, 24 million of whom
are signed up today and receiving benefits, to a situation where
they would be getting less care than they are today. So we should
not be so flippant in casting out babies with bathwaters when it
comes to a program that was hard fought to get accomplished in
the first place.
So while I commend the Chairman and suggest that there is
much to be done in improving this situation, the idea that we are
going to play, once again, politics with prescription drugs instead
of trying to get down to the hard work of trying to fix this system
and its implementation, I think is below the dignity of this committee.
I am happy that Dr. McClellan is here. As he knows, we have
had many conversations in the last few weeks about the situation
in Pennsylvania. I have spoken to Secretary Leavitt on more than
one occasion and have encouraged him and am still working with
him to have him come up to Pennsylvania.
But that does not mean that we need to start all over or throw
this program out. We need to continue to look at it, see if we can
implement it correctly, solve the problems that exist, make changes
if some are necessary here in the Congress that in all likelihood we
created in the design of the program, and then go about the process
of making sure that seniors get the kind of care that we have told
them that we are delivering to them.
I can tell you that in PennsylvaniaI have just gotten numbers
from the problems that exist in my Statefor excessive cost-sharing claims, we have about 250 people a day that have made claims
to the State to help on that regard and the State has paid out
about $100,000. For emergency supply claims, there is about 175
to 200 people per day that have cost the State so far about $55,000.
For super priority prior authorizations for dual-eligibles, we have
had 180 claims that have cost the Commonwealth $15,000.
Now, each one of these is a problem, but I would not suggest that
these numbers suggest that we should throw the program out and
start all over again when you are talking about tens of thousands,
if not hundreds of thousands, of people being served in the Commonwealth.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00018

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

15
So I would just suggest, Mr. Chairman, that we get down to business in figuring out what the problems are, how we can fix them,
how we can improve them, and what Congress role in creating the
problems and what our role should be in trying to fix them.
Thank you, Mr. Chairman.
The CHAIRMAN. Thank you, Senator Santorum.
We have on our first panel two witnesses. We are grateful, Dr.
McClellan and Ms. Linda McMahon, for your presence here. Dr.
McClellan is the administrator for CMS and Linda McMahon is
deputy commissioner of Operations at the Social Security Administration.
To my colleagues, we will have 5-minute rounds of questions
afterwards, so Mark, take it away.
STATEMENT OF MARK B. MCCLELLAN, M.D., ADMINISTRATOR,
CENTERS FOR MEDICARE AND MEDICAID SERVICES, U.S.
DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC

Dr. MCCLELLAN. Thank you, Mr. Chairman, Senator Kohl, all of

the members here who care so passionately about this program. I
appreciate the opportunity to give you a status report on the new
prescription drug coverage.
Currently, more than 24 million Americans are receiving help
through this program. This includes millions who previously had
no coverage, millions who now have better coverage than their
Medicare Advantage plans, more complete, more comprehensive,
and millions now getting real help keeping their retiree coverage
in place, coverage that has been going away over the past 20 years.
Drug plans are now filling millions of prescriptions each day. Every
day, tens of thousands of new beneficiaries are using their new
drug coverage to save money, to get peace of mind, and to stay
healthy, and because of competition, because of choice, this coverage is costing much less than people expected, with premiums
one-third lower for beneficiaries than had been predicted as recently as last summer.
A change this big in this short a period of time is bound to have
some problems and I am very concerned about anyone who has experienced problems in getting their medicines at the pharmacy
counter the first time they tried to use their coverage. In particular, some problems with data translation between Medicare and
the drug plans and States may potentially have affectedpotentiallya few hundred thousand of the six million people with Medicare and Medicaid, particularly those who switched plans late in
December. At the same time, some pharmacies have had difficulty
in using the support systems intended for those beneficiaries.
We make no excuses for these problems. They are important,
they are ours to solve, and we are finding and fixing them.
We have outlined some urgent actions that we are taking in a
1-month report that was just released by the Department of Health
and Human Services. This includes actions with our information
systems, the health plans, pharmacists, and States, all to help all
of our beneficiaries use their coverage smoothly.
On our systems, we built and tested each component and we are
working with the health plans and the States to continue improv-

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00019

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

16
ing them. Prior to January 1, to insure that all duals that we knew
about were appropriately covered, we exchanged data files with the
States to compare our respective lists. The data matched at a rate
of more than 99 percent according to an outside review. To verify
that our enrollment information matched plan information, we
transmitted, again, files with dual-eligible and low-income subsidy
individuals to the plans on January 13, 18, and again on January
30. We are working to provide significantly faster responses to information submitted by plans on their new enrollees and the drug
plans are working with us to submit data in ways that can be processed successfully and quickly.
With the plans, we have set up specific checks to ensure that
they provide adequate formulary coverage of all needed medicines,
particularly those for specific disease populations, such as HIVAIDS and mental illness that have been a particular concern to
this committee. We developed specific procedures for timely exceptions and appeals. In using this procedures, a Medicare beneficiary
can get coverage for a drug not on a plans established formulary.
In addition, we required plans to have a transition policy for
dual-eligible individuals, as you all noted, to get a one-time supply
of their current medications while they determine whether a less
expensive, very similar medicine will work for them or if they need
to continue their current drugs. I have made it clear to the drug
plans that these transition policies must be followed and we will
take further enforcement actions, if necessary.
Many plans have extended their transition policy for the large
number of beneficiaries who started their coverage in January. To
help ensure a smooth transition for these beneficiaries, Medicare is
notifying plans that the transitional coverage period in effect now
will continue for 60 more days.
To help pharmacists identify what plan a beneficiary is in when
a beneficiary shows up without a card or other billing information,
we collaborated with pharmacists starting in 2004 to create an
electronic eligibility and enrollment checking system that operates
as part of the existing pharmacy computer systems. Response times
since January 2 have been less than 1 second and the number of
queries is decreasing steadily, because that means more individuals
have their cards or their billing information when they go to the
pharmacy.
I and my staff have visited pharmacies. We have seen firsthand
what they have done to help make sure even those beneficiaries
who have difficulty are getting the medicines they need, and we
have been very impressed with the tremendous work of the nations
pharmacists and we are listening to their ideas for improving the
program. That is one reason we just announced some new steps,
like supporting efforts by plan and pharmacy groups to implement
consistent and clear messaging systems in pharmacy billing, and
that is why we are paying close attention to customer service and
pharmacy service.
I am pleased that over the last few weeks, many plans have
made great strides in implementing effective pharmacy service
lines, and to ensure that they all do so, we are increasing our monitoring and reporting on plan help lines as a basis for further enforcement actions, if necessary.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00020

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

17
We have also worked closely with the States, beginning in 2004,
on automatic enrollment and on the low-income subsidy eligibility
application, the calculation of the State phase-down or claw-back
contributions, on training to assist beneficiaries, and on exchanging
information between Medicare and Medicaid. When pharmacies
were having difficulty filling prescriptions for certain dual-eligible
beneficiaries, as you all have noted, a number of States turned
their Medicaid systems back on to assist those individuals, and we
appreciate the help that States have provided to support pharmacists serving these beneficiaries. We have put in place a payment program to reimburse States for the direct and administrative costs that they incurred.
We are seeing that States that work closely with us, like the
State of Pennsylvania, on supporting pharmacists and using the
new Medicare systems and connecting people to their Medicare coverage have been able to limit billing to the State systems to relatively small amounts, often just a very small fraction of dually eligible individuals, as they connect those people with their coverage.
We intend to work closely with all States to use these approaches
to complete the transition to Medicare coverage for the remaining
dually eligible beneficiaries.
I want to talk for a minute about the millions of beneficiaries
who are choosing to enroll in Medicare coverage and get new savings and protection available right now. It takes a little time to
process people through the eligibility and enrollment systems. After
you enroll, you will generally get an acknowledgement letter in a
week or so and then your drug plan I.D. card in 3 to 5 weeks. That
acknowledgement letter and the card contain important information that makes it easier for the pharmacist to help you use your
coverage the first time. So we are encouraging people who enroll
or change a plan to do so in enough time to get that information
into the system.
If you enroll before the 15th of the month, you should have the
information you need by the beginning of the next month when
your coverage starts. In those cases, we have seen over 90 percent
of individuals use their coverage for the first time without difficulty. People who sign up later will still get their medicines, but
they are more likely to spend extra time working through some details. As we continue to find and fix problems, we are seeing fewer
of these cases.
We are going to continue working around the clock to help every
Medicare beneficiary who enrolls to use their new coverage and we
are seeing that using the coverage means real savings. Now, for the
first time, we have independent budget estimates of the costs of the
drug coverage that are based on the actual experience with the
strong competition to provide coverage. Medicares drug benefit will
have significantly lower premiums and lower costs to Federal taxpayers and States as a result of stronger than expected competition
with lower drug costs. Beneficiary premiums are now expected to
average $25 a month, down from the $37 projected in last Julys
budget estimates. Taxpayers will also save. State contributions for
a portion of the Medicare drug costs for beneficiaries who are in
both Medicare and Medicaid will be 25 percent lower over the next

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00021

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

18
decade. All of these savings result from lower expected costs per
beneficiary.
I want to thank you for the opportunity to discuss this first important month of the Medicare prescription drug benefit. While we
are pleased that millions of Medicare prescriptions are being filled
every day, we are going to continue working around the clock all
over the country with all our partners to ensure every person with
Medicare can use their coverage smoothly, and I am happy to answer any questions you all may have.
The CHAIRMAN. Thank you very much, Doctor.
[The prepared statement of Dr. McClellan follows:]

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00022

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00023

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.001

19

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00024

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.002

20

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00025

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.003

21

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00026

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.004

22

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00027

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.005

23

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00028

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.006

24

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00029

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.007

25

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00030

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.008

26

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00031

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.009

27

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00032

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.010

28

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00033

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.011

29

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00034

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.012

30

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00035

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.013

31

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00036

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.014

32

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00037

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.015

33

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00038

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.016

34

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00039

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.017

35

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00040

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.018

36

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00041

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.019

37

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00042

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.020

38

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00043

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.021

39

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00044

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.022

40

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00045

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.023

41

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00046

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.024

42

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00047

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.025

43

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00048

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.026

44

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00049

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.027

45

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00050

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.028

46

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00051

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.029

47

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00052

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.030

48

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00053

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.031

49

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00054

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.032

50

51
The CHAIRMAN. Linda McMahon.
STATEMENT OF LINDA S. MCMAHON, DEPUTY COMMISSIONER
FOR OPERATIONS, SOCIAL SECURITY ADMINISTRATION,
WASHINGTON, DC

Ms. MCMAHON. Thank you, Mr. Chairman, Members of the Committee. On behalf of Commissioner Barnhart, I want to thank you
for inviting me to discuss Social Securitys efforts to implement the
new Medicare Part D Low-Income Subsidy Program.
As you know, I am Linda McMahon, deputy commissioner for
Operations at the Social Security Administration, and I have been
with the agency for 15 years. As you know, SSA was given the responsibility by Congress to take extra help applications and to
make eligibility determinations for individuals who were not automatically eligible for the subsidy. We are also responsible for deducting Part D premiums from Social Security benefits when Medicare beneficiaries tell the Prescription Drug Program (PDP) provider that they want that payment option.
SSA was given these Medicare Modernization Act (MMA) responsibilities because of our network of nearly 1,300 offices and 35,000
field employees across the country and because of our prior role in
administering some parts of the Medicare program. Upon passage
of MMA, we immediately recognized that development of a simplified application for the extra help was essential for successful
implementation of that part of the program. Working with CMS,
we conducted extensive testing of the extra help application form.
In fact, the paper application changed significantly over time and
went through many drafts before it was finalized.
Our Office of Systems staff also contributed to the design of the
application to make sure that the information on the form could be
electronically scanned into our computers. That made it easier for
applicants and people who assist them to apply and it minimized
the number of employees that we need to process those forms.
Then we worked to develop alternatives to the traditional paperbased application, and in July of last year, we unveiled the Internet version of the application. That allows people to apply online
for help with costs associated with the Medicare prescription drug
plan. The online application has been a tremendous success and
more than 2,000 Internet applications are being filed daily.
Telephone inquiries were also part of our efforts to make the
extra help application process as simple as possible. We provided
extensive training to our teleservice representatives so that they
could answer subsidy-related questions. We developed an automated application-taking system, allowing the teleservice representatives to refer callers directly to specialized claims taking
employees who could then take the applications by phone.
Finally, we developed a computer matching process with the Internal Revenue Service to validate certain income information provided by applicants. Using this computer match allowed SSA to
build a process that would not require applicants to submit proof
of resources and income as long as their statements on the application were in substantial agreement with the computer records.
Now, to ensure that this simplified process that I have just described was put to use, we have worked hard to inform Medicare

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00055

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

52
beneficiaries about the extra help available for prescription drugs.
For example, during the past year, Social Security has held more
than 66,000 Medicare outreach events throughout the country, and
we have hosted a number of application-taking sessions in Social
Security offices. We continue to work with States and other organizations to identify people with limited income and resources who
may be eligible for the extra help.
Although the new prescription drug plan did not begin until January 2006, SSA began mailing subsidy applications to potentially
eligible individuals in May 2005, and this initial effort allowed us
to begin making eligibility determinations for extra help as early
as July 2005.
Now, as has been pointed out, as important as the initial mailing
of the applications was, follow-up contacts with those individuals
who did not return the application has been and continues to be
just as important to us. As an example of our ongoing efforts to
help enroll as many eligible individuals as possible, we are contacting Medicare beneficiaries who have requested Part D withholding from Social Security benefits and who were mailed a subsidy application but didnt return it. We will be contacting them by
phone or by mail and we want to see if we can assist them in applying for the extra help. We will also continue to use our routine
agency mailings, such as COLA notices, to inform the public about
the subsidy.
So, what has resulted from all this effort? Well, as of January 27,
almost 4.4 million people have applied for the extra help. We processed almost 4.1 million, or 93 percent of those cases. Almost
700,000 cases did not require a decision by SSA because the person
was already deemed eligible or they had filed a duplicate application. But of the 3.7 million applicants who do require a decision,
we have now made determinations for over 3.4 million of them and
found nearly 1.4 million of those individuals eligible. That is a 40
percent eligibility rate.
In conclusion, I want to express Commissioner Barnharts appreciation and my personal thanks to Congress for providing SSA with
the resources that we needed to begin this challenging process.
Your assistance in fiscal years 2004 and 2005 made it possible for
us to hire more than 2,500 employees to work on implementation
of MMA provisions. It also allowed extensive training for thousands
of on-duty employees and made possible the design of critical new
computer systems. Your support has truly been crucial.
We look forward to working with the Committee as we progress
with implementation of the extra help program, and we appreciate
this opportunity to tell our story and will be happy to answer questions.
The CHAIRMAN. Thank you very much, both of you, for, again,
your presence here and your testimony.
[The prepared statement of Ms. McMahon follows:]

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00056

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00057

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.033

53

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00058

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.034

54

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00059

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.035

55

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00060

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.036

56

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00061

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.037

57

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00062

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.038

58

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00063

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.039

59

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00064

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.040

60

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00065

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.041

61

62
The CHAIRMAN. Mark, I think, obviously, the question in all of
our minds is, while many of the problems we are raising today are
problems we foresaw last March when we had a hearing here, but
clearly the transition didnt go as smoothly as we wouldve liked.
I mean, why, with all that advance notice, has there been such a
difficult transition?
Dr. MCCLELLAN. We did have a lot of discussions about the transition issues for the new Part D benefit and I really commend the
committee on a bipartisan basis for paying close attention and having many constructive ideas about how we could make the transition go smoothly. You will recall when we talked last spring, we
raised a lot of issues around long-term care pharmacies, about
making sure that plans would comply with the necessary support
that those pharmacies needed for their nursing home beneficiaries.
We talked about coverage of needed drugs for people with mental
illnesses and other conditions where the specific drug really
mattered.
In many of these areas, we were able to make further enhancements in the program to address concerns, about everything from
packaging issues in nursing homes, to new kinds of support to help
nursing homes identify the plans their beneficiaries are in and bill
them properly, to expanding and being clear about the broad formulary coverage requirements for people with mental illness, HIVAIDS, and other serious conditions.
We also talked about the transition issues for people who were
dual-eligibles around January first and steps that we could put in
place to make sure they got their medications at the pharmacy and
we took those suggestions, like getting in place this automatic information system that many pharmacists have been able to use to
avoid the phone calls that they routinely have to face when people
start a new program.
The CHAIRMAN. Isnt it true you have also extended the enrollment deadline from 30 days to 90?
Dr. MCCLELLAN. The transition coverage has been extended to 90
days.
The CHAIRMAN. Ninety days.
Dr. MCCLELLAN. We talked last spring about the importance of
transitional coverage and we are watching that very closely, as are
the plans, to make sure we have got that in place for a long enough
period for people to smoothly decide whether or not the drugs they
are on now could be switched with alternatives. But again, we have
got broad formulary requirements in place now for the drugs for
conditions like mental illnesses and cancer and AIDS where it really matters.
So that dialog with you all has been extremely helpful and we
are going to continue taking every step we can to make this transition go smoothly. It was a big change on January 1 with the entire
dual-eligible population moving over, as required under the statute,
and suggestions, the input that you all had in this process has been
very helpful for limiting the number of cases where people have
had significant difficulties and we will keep working very closely
with you to address the cases that we are seeing, to find the problems and fix them.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00066

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

63
The CHAIRMAN. I am also mindful that Secretary Leavitt announced or assured the States that their costs in this transition
would be reimbursed.
Dr. MCCLELLAN. We did. We had an announcement about that
last week. We have been working closely with the States on the
best mechanism for providing this reimbursement and many of the
State Medicaid directors, other State officials that I talk with frequently have had some very constructive ideas on how to do it. We
have seen many States working closely with us, just like Senator
Santorum mentioned, Pennsylvanias close work with our regional
office. The same thing is happening in Oregon, Delaware, and
many other States to limit the number of cases where there are difficulties and to get people connected with their coverage quickly.
So we have put forth a reimbursement program based on a demonstration, a model waiver. We have the details of that program
coming out right away, basically just a checklist that States can go
through for following these best practices to get people connected
with their coverage and we will handle the reimbursement. The
State submits the claims to us. We work on reconcilingwe do the
work for reconciling them with the plan payments, and for any difference in higher Medicaid payments than what these competitive
plans are paying, we will make up that difference, too, and we will
also pay for any reasonable administrative costs in the process.
The CHAIRMAN. I have heard horror stories, Mark, about long,
long call waits for people trying to get information. Have you
beefed up the call center?
Dr. MCCLELLAN. We have, and I know we have been working
very closely with your staff on monitoring how the call centers
work is going. In the very early days of the program, we had relatively long waits on our line at 1800MEDICARE. I am proud
to say that we have kept those average wait times, even during the
first week in January when we had the largest number of these
complaints and transition questions. We had the wait times under
5 minutes. We have been monitoring it closely since then. It is
under a minute for the most recent days and definitely no more
than a few minutes at any time during this month.
We are also very pleased at how many of the prescription drug
plans have responded. Many of these plans quickly, after the first
week or two, staffed up their own help lines for customers, for
pharmacists, and others. We have been monitoring those wait
times and we have seen them come down substantially to acceptable levels of just a few minutes for many of the plans and we want
to make sure all the plans get there, and that is why we announced
yesterday that we are going to be taking some further steps to
monitor and even publish the performance measures for these
plans.
The CHAIRMAN. Senator Kohl.
Senator KOHL. Thank you, Mr. Chairman.
Dr. McClellan, why not allow Medicare to negotiate maximum
discount from the pharmaceutical companies? These are actual tax
dollars we are talking about, and if the program meets anywhere
near its expected projected costs over 10 years, $750 billionwho
knows what it will costa 20 percent discount is $150 billion.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00067

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

64
Wouldnt you expect taxpayers to expect the government to get
these prescription drugs at the minimum price necessary?
Dr. MCCLELLAN. I expect our program to get the best possible
cost for implementing this program. That is why we are very
pleased with the results that we are seeing so far based on the actual costs of the program that is coming in, where the drug plans
are competing and getting the costs of coverage down way below
what had been projected. We are seeing cost projections now, these
numbers that we released today, showing costs that in 2006 are
going to be 20 percent lower for the Federal Government than had
been forecast. As our actuaries and other independent experts had
said at the time, they do not believe that with the steps that we
have in place to encourage strong competition, to encourage price
negotiation to get lower prices to beneficiaries, that any additional
government price negotiation would save more money.
Our concern about more government negotiation is, as you know,
the way the government can get lower prices, the same thing that
many of the plans have done but we regulate very carefully, they
do it by narrowing the formularies. This is how the VA plan, which
has a considerably narrower formulary than we have required the
Medicare plans to have, means that many people would not be able
to continue taking the drugs that they are on right now, the ones
that their doctors have prescribed and that they have decided, or
they may want to decide they want to continue, even if they are
not on a formulary.
So we are very concerned about making sure that our
formularies are broad enough and that the plans negotiate and get
the lowest possible costs of coverage, and that is exactly what is
happening. That is why the costs of this drug benefit for each person covered is coming in so much lower than people had expected,
and that means savings for beneficiaries in the lower premiums,
savings for the Federal Government, and savings for States, that
25 percent lower claw-back payment that I mentioned earlier.
Senator KOHL. Well, that is well and good and I am sure that
argument in your mind is a very strong one, but when you have
a single buyer, in this case Medicare, negotiating for a huge discount based on the size of their purchase, all the evidence is that
you get a much bigger discount than if you have, like 46 different
plans negotiating their own much smaller discount based on their
purchases. All the indications are that the bigger your buy, the bigger your discount, and apparently you are saying that that law of
business is not true.
Dr. MCCLELLAN. Well, these drug plans includemany of these
plans are large health care organizations that already cover millions of Americans under 65, millions of Federal workers and retirees, and so have very large population bases, so they can drive
those stronger discounts. Again, that is what we are seeing. If you
include not just the low pricesthere have been some studies that
have come out recently that kind of tilt the scale by counting Medicaid rebates in the Medicaid price side but dont count the rebates
that the private plans are also getting and that they are required
to incorporate in the payments they get from us and the bids that
they put in. When you do that, you see low costs.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00068

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

65
That is why we are hearing from many States that in their Medicaid plans, where the State does the negotiation, their costs are
expected to be higher than under the drug plans. That is why we
are having to supplement what we are paying some of the States
in this repayment program beyond what the drug plans would pay
for the same drugs.
Senator KOHL. I appreciate that. I would just end the subject in
terms of my inquiry this morning by saying that after 1 month, to
make a projection is almost ludicrous, and to expect us to sit here
and say, well, that is the deal, 1 month in, that is the deal, you
knowyou know that you should not make that with any certainty. It is just a number you are throwing out. It is no different
than so many of the projections that come out from this administration about the costs of the deficit, the costs of this, the costs of
that, and it turns out to be wildly inaccurate. So we take what you
say this morning as being sincere, but as certainly not the last
word.
Dr. MCCLELLAN. I agree with that. We should keep watching
very closely on this and every other aspect of the program. This is
the first time, though, that our independent actuaries have been
able to incorporate actual data from the cost of this benefit as it
is actually being delivered in doing their estimates.
Senator KOHL. On another subject, the pharmacies that have
been filling prescriptions and not getting paid, Senator Burns said
a minute ago that they are going to get reimbursed, but as you
know, nothing has been determined with certainty with respect to
that. As you also know, many of them are paying out money from
their pocket, money they dont have, and they need to be reimbursed immediately and they deserve to be reimbursed as soon as
they present the evidence. How we are going to get that thing
done?
Dr. MCCLELLAN. Well, as I have talked to pharmacists and pharmacy leaders around the country, which we do on an almost daily
basiswhich I do on an almost daily basis and our staff all over
the country is doing regularly, as well, this is now getting to be one
of the top levels of concern, and one of the reasons is that we have
had a change in the way the pharmacy contracts work. Up until
now, for many of the people who are covered by the drug benefit,
they were previously covered in Medicaid, which had one payment
schedule, typically paying once a week, or people who were paying
cash, and those are people who would pay right at the time, often
very high rates, but right at the time, right at the pharmacy
counter.
Under the contracts that the pharmacies have with the drug
plans, they get paid several times a month based on claims submitted, and so we have had a period over the last couple of weeks
where the claims have started going in but the checks havent
started coming out. Now, we are watching very closely to make
sure that the drug plans pay according to the contractual payment
schedules that they have set up. Those payments have started to
come out recently. Some plans pay every 10 days. They have already sent out millions of dollars in payments. Others pay every
15.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00069

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

66
Those checks are going out starting right now, and we want
pharmacists to know that if they are having problems getting the
contractual terms met, that is one of the areas where CMS monitors complaints and we will help enforce those contracts. But there
are a lot more things that we can do to help pharmacists that I am
sure are going to come up later in this hearing and I want to talk
about those, too.
Senator KOHL. Thank you, Mr. Chairman.
The CHAIRMAN. Senator Carper.
Senator CARPER. Thanks. Thank you for your testimony. I
thought it was helpful. I want to ask for a clarification, if I can,
from Ms. McMahon. I said in my opening statement that I think
that there are about eight million eligible beneficiaries, low-income
beneficiaries for this program, and I said, to date, only about 1.1
million people had been found eligible. That was through December
31. I think I heard you say that
Ms. MCMAHON. As of January 27, that number is 1.4 million that
we have determined eligible.
Senator CARPER. Here is my question. Does that mean that there
are roughly another just under seven million eligible low-income
beneficiaries that we still have to potentially be signed up for this
benefit?
Ms. MCMAHON. Well, I would have to put the answer to that this
way. We sent out almost 19 million notices to people to say, you
are potentially eligible. We knew that not all of them would be eligible, but we wanted to cast the widest net we possibly could to
make sure that anybody that had any hope of being eligible, we
would contact, and we are trying to follow up with those folks.
What is the actual right number of people? One of the things we
are finding out is that there are more people who have higher resources than we expected, which in a way shouldnt be a surprise
because a large part of the population are people who went through
the depression and World War II. They saved money. Maybe they
dont spend like my generation does. So they have higher resources
than we expected. In fact, even with $10,000 and $20,000 resource
limits, they have maybe $17,000 more over that. So we dont know
exactly how many people are eligible.
Senator CARPER. We know it is more than 1.4 million.
Ms. MCMAHON. Yes, we do.
Senator CARPER. I would just urge you to increase your efforts,
continue your efforts to help us find them, help them sign up, OK?
Ms. MCMAHON. We are going to do that, and in fact, we are hoping that we can get ideas
Senator CARPER. That is all I want to say. That is all I want to
say because I have got a lot of questions here I want to get into
Ms. MCMAHON. All right.
Senator CARPER [continuing]. But thank you. Dr. McClellan, this
is a question that could be for either of you. Just help me on this.
If a person signs up, picks one of these plans, in my State we have
got a whole lot of plans, I think a whole lot more than I expected,
and I think it is part of the confusion for pharmacists and for seniors, as well. But if somebody signs up, as I understand it, in a particular plan, they think it is best given the medicines they take, do
I understand that the plan itself can change and maybe, say, drop

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00070

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

67
out coverage, decrease coverage for some of the medicines, and we
will say that happens in April, then do I understand that the beneficiary, the senior citizen, has to wait until the end of this calendar
year in order to be able to change plans and pick out a plan that
better suits their needs?
Dr. MCCLELLAN. Well, first of all, as you know, Senator, the drug
plans all have to meet our broad formulary requirements. These
are broader than the requirements in many Medicaid prescription
drug programs, broader than the VA formulary requirements.
Eighty of the top 100 drugs are typically covered by plans, so that
the plans are having broad formularies to start with to make sure
all medically necessary drugs are available.
Plans can change their formularies, and I want to talk about two
different kinds of cases. One is when something new happens in
medical knowledge or medical treatment availability, so there is
new information suggesting that a drug shouldnt be used in certain circumstances or a new generic version of a medicine becomes
available. Those are things that the plans should incorporate in
their formularies to help make sure people get the right treatments
for their conditions at the lowest cost.
Plans have an ability to change formularies otherwise, but only
if they replace one drug with another drug that is in the same category, works in the same way, and offers as good of benefits to the
patient. But in order to do that, several things have to happen
first. First, they have to submit this information to us to have a
CMS approval for making any such formulary change. Second, they
have to give advance notice to their beneficiaries so that there is
plenty of time for the beneficiary to determine whether they should
stay on the drug they are on now or whether going to this other
less expensive alternative is better for them.
So far, we have seen no cases of that occurring. We also had
some experience with this with the drug card that was in place for
a couple of years and that millions of people use to lower their
prices. There were also concerns that this would happen then. We
monitored. Again, we saw essentially no cases of such formulary
shifting. We are going to watch very closely to make sure the plans
continue to provide the level of coverage that they have promised
from the beginning. I think they have generally every intention of
doing that, but we are going to verify that that happens.
Senator CARPER. Be vigilant. Be vigilant.
Dr. MCCLELLAN. Yes.
Senator CARPER. We have established in Delaware a Delaware
Prescription Assistance Drug Program when I was privileged to be
Governor of our State. A lot of States have them, as you know.
Dr. MCCLELLAN. Yes.
Senator CARPER. CMS recently announced the waiver process
would allow States to be reimbursed for costs that they incur in
paying for drugs for dual-eligible beneficiaries. However, a number
of States like my State, and I think like probably half of the States
that are here represented on this committee, States where we are
incurring costs for other low-income beneficiaries, like those in our
own State Prescription Assistance Program, I am told thatI met
with our Secretary of Health and Social Services recently and I
learned from him that our States Prescription Assistance Program

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00071

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

68
has over, I guess, over 10,000 enrollees now, which is a lot for a
tiny State and has really stepped up to the plate to help enrollees
navigate the new benefit and we are trying to blend the two together so that we really dramatically increase coverage and use the
strength of both programs.
In some cases in Delaware, we are incurring costs for the Delaware Prescription Assistance Program enrollees who have enrolled
or tried to enroll in a Part D plan but have not yet been recognized
by the plan as enrolled. Here is my question. Will CMS open the
waiver process to States like my own and like others who have established their own Prescription Assistance Programs and who
have incurred unnecessary costs in other State programs? I would
ask that if you can get into that now, fine, but if now, I just really
would ask that you and your folks address it.
Dr. MCCLELLAN. The reimbursement plan that we have discussed does apply to State assistance programs for other low-income individuals, other partial dual individuals who were enrolled
in the Medicare program and either they or theirbecause of
issues with the pharmacy, they didnt get the coverage they should
have received. So that is part of our program.
I want to say, as well, that the program in Delaware, like in
many other States, is terrific. It is going to get a lot of help from
the new Medicare coverage because you now only have to wrap
around the basic Medicare benefit, and Senator, I would like to
make sure we follow up specifically with you to resolve these issues
in Delaware. We have had a very close working relationship with
you and the State and I want to make sure that continues as we
work through these transition issues.
Senator CARPER. My time has expired. I would just add, if I
could, one last sentence, Mr. Chairman. The folks that are in our
Delaware Prescription Assistance Program are not dual-eligibles.
They are not dual-eligibles. They are low-income.
Dr. MCCLELLAN. Let me follow up with you. If they are not dualeligible or low-income, we will work directly with you and the State
on addressing this.
Senator CARPER. Thank you so much.
The CHAIRMAN. Thank you.
Senator Clinton.
Senator CLINTON. Thank you, Mr. Chairman. I want to start by
trying to get some clarification. Senator Burns said that CMS is
committed to reimburse pharmacies. My understanding based on
what Secretary Leavitt told the Finance Committee is that he did
not want to make such a commitment at this time to reimburse
pharmacies and that, in fact, the pharmacies will need to seek reimbursement through private drug plans. Is that correct?
Dr. MCCLELLAN. Well, pharmacists that have done a terrific job
in stepping up with the implementation of this program need to be
paid for the drugs that they provided and we are going to make
sure that the contracts with the drug plans are enforced, and if
there are any difficulties in making those payments, we will help
ensure the payments do take place.
Senator CLINTON. Well, that is an important commitment. I
would just suggest, though, that given all the confusion, oftentimes
pharmacists dont even know which plan a beneficiary is enrolled

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00072

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

69
in. They are going to have to go back and get that information.
These contractual obligations may be difficult for them to enforce.
I think many of us expect that these pharmacies will get reimbursed one way or another and we will look to CMS to ensure that
that does happen.
I have a series of questions, Dr. McClellan, and I would appreciate brief answers because I know we all have a lot of information
we are trying to get out.
Will you support our legislation to waive fees and copayments for
dual-eligibles in assisted living facilities?
Dr. MCCLELLAN. We are strong supporters of getting people into
assisted living. We need to hear more about how this legislation
would work. We are already working with a number of States that
are picking up those copayments and combining it with some of the
home and community-based waiver services, some of the other programs that already exist to help people in assisted living.
So we would like to hear more about the legislation, and in the
meantime, we are going to do what we can under current law to
help States fill in those copays, and many States are already either
doing that or considering doing that. As you said, they are limited
copays from the overall budget standpoint of a State. They are very
important for those particular individuals and we want to do all we
can to help people get out of institutions. It is a strong commitment
of this Administration and we will work with the States and definitely want to talk with you further about your legislation.
Senator CLINTON. Well, we will move quickly on that because
right now, there is a tremendous burden being imposed. So as
quick as you can get some assessment as to the best way to do
that, we need to hear it because we cant let this just linger on, so
I appreciate your willingness to work with us.
I am also concerned about the additional problems that we are
encountering with respect to mental illness. Will you provide us
with data on the numbers of beneficiaries that file appeals to plans,
the number of successful appeals and rejections by plans, and information on the timeliness with which plans handle appeals?
Dr. MCCLELLAN. We definitely want to work with the committee
on that. I think that is an important part of the oversight and our
continuing interaction on making sure that implementation goes as
smoothly as possible. I would point out that with our extension of
the transition period for another 60 days, people who are on medications now are going to continue them. I also point out that we
have very broad formulary requirements, essentially all drugs for
mental illnesses, especially for people who are already stabilized on
those drugs. So I wouldnt expect to see a lot of information on appeals from this particular area for a while because of these other
steps that we have taken. But we definitely want to keep a close
eye on that with you.
Senator CLINTON. Now, your announcement that you will reimburse States requires that States cease using State reimbursement
systems and return to the Medicare prescription drug system by
February 15. In light of the problems we have seen, would you reconsider continuing to assist States that may have to step in and
pick up costs for their citizens who are not getting their benefits?

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00073

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

70
Dr. MCCLELLAN. Senator, the payment program does include an
opportunity to extend its period beyond February 15. What we expect, based on what we are seeing from many States already, is
that there are specific steps that States can take to minimize billing into the State systems. Those kinds of steps, we expect States
should be able to put in place by the middle of February if not
sooner, and that is going to drive down the use of State reimbursement in the cases where States havent done that yet.
Senator CLINTON. But in the case of the exceptions
Dr. MCCLELLAN. But if there are still exceptions needed, if there
is still additional limited help needed beyond that, that definitely
is part of the waiver process, as well, and we would discuss that
with the particular State. The goal here that we have is the same
as the States have, is to get these beneficiaries, all of these beneficiaries, transitioned to their Medicare coverage as quickly as possible.
Senator CLINTON. Dr. McClellan, with respect to the plans requiring forms, some as long as 14 pages, for doctors to fill out, you
have requested that the plans discontinue this practice, but at least
according to our information, it does not yet seem to have taken
hold. Will you require the plans to end this practice?
Dr. MCCLELLAN. We have been watching this very closely, too. I
am pleased that many of the plans have taken steps or already
have in place steps to have a smooth and straightforward exceptions and appeals process. We have also worked very closely with
pharmacy groups, medical groups, and others to develop a model
form that is very straightforward, exactly as you are discussing.
I think we have talked about how some of the benefits of competition here, getting to lower costs, but obviously what many beneficiaries want right now is more simplicity and I think you are
going to start seeing the market respond and the plans respond to
that. That is what people want, is a straightforward way as possible to use these benefits. We are going to help push that along
by working with the plans and pharmacy groups on things like a
standard exceptions and appeals form. So I think you will be hearing more about that in the days ahead. Remember, we have got 60
more days with the extension of our transition coverage period to
help make sure these processes work as smoothly as possible.
Senator CLINTON. I highly commend the idea of a single form. It
has been my experience that insurance companies thrive on complexity and confusion in the health care arena, so the more it can
be simplified, I think the more money we will save, the quicker we
will get the services out to the people who need them, and the burden will be removed from doctors who shouldnt be spending their
time filling out forms to make a case for a drug that they have prescribed for years for their patient.
Mr. Chairman, I really thank you for having this hearing. I hope
we have a continuation of these hearings. I share my good friend
Senator Kohls skepticism about costs. I, a long, long time ago, took
a course in consumer law and the concept of bait-and-switch has
stayed with me ever since, so this has to be watched extremely
closely if it is going to have the benefits that we want it to have
for people. Thank you.
The CHAIRMAN. Thank you.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00074

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

71
Senator Talent.
Senator TALENT. Thank you, Mr. Chairman.
Director McClellan, on page two of your statement, you have a
graph which I have been trying to understand. In the statement introducing it, you say that there were 15 million people with drug
coverage on December 21 and 24 million on January 14. Would you
explain that a little bit?
Dr. MCCLELLAN. The increase in enrollment related to more people signing up on their own, more retirees registering for coverage
to get support for their retiree coverage, as well, and that is what
has gotten to the number that now exceeds
Senator TALENT. So those retirees had the coverage, but what
they now have is a subsidy in addition to it?
Dr. MCCLELLAN. They didnt have a subsidy, and what they
didnt have was much security in keeping that coverage in place.
As you know, in Missouri, a lot of retiree plans have been dropped
or cut back. The plans now have new support from us to keep them
in place and to keep high-quality benefits there, and there are hundreds of firms and thousands of beneficiaries in Missouri who are
taking advantage of this new help.
Senator TALENT. So what you are saying is that there are nine
million additional people who are receiving some benefit because of
the new program.
Dr. MCCLELLAN. I would say it is even more than that. It is true
that many of the people who are in the Medicare Advantage health
plansthose are the HMOs and the PPO plans in Medicare that
existed before, in many cases, before 2006, those plans did have
some drug coverage in many cases. They all offer extra benefits
and lower cost for the people who enroll in them. That is why many
seniors, and more and more seniors are signing up for those plans.
What the drug benefit allowed them to do was enhance that coverage. So instead of having $250 worth of help for a quarter that
just ran out, people now have a relatively comprehensive drug benefit and it costs less and it offers more coverage, less of a doughnut
hole, no deductible, things like that, that are not available in the
basic Medicare benefit. So people in Medicare Advantage
Senator TALENT. Superior to what they had under the HMOs?
Dr. MCCLELLAN. Exactly. Similarly, the retiree coverage trends
over the last years have been steadily downward. We have seen
that halt with the result of the new subsidy being implemented.
Then there are millions more people, including many, many in Missouri, who are getting new drug coverage who didnt have it before
and saving a lot of money.
Senator TALENT. So the nine million figure is people who didnt
have any drug coverage before who now have it, plus people who
were on HMOs who are now on Medicare Advantage and getting
improved coverage.
Dr. MCCLELLAN. I think the figure is even larger than that. I
think that iswhat you are looking at is a change in enrollment
between the last part of December and early January. Going into
the last part of December, there were already many people who
had enrolled either through a Medicare Advantage plan or a retiree
plan or something like that.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00075

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

72
Senator TALENT. Well, since we may evidently have a debate on
whether to scrap the whole thing, it might be a good idea for us
to get down exactly the benefits people are getting, and my sense
of it is that there are millions of people around the country
Dr. MCCLELLAN. Oh, yes.
Senator TALENT [continuing]. Who are getting a substantial additional benefit, either coverage that they did not have or better coverage or stabilization of the private retiree coverage that they had.
Dr. MCCLELLAN. That is right, and they are
Senator TALENT. I am certainly running into a lot of people in
Missouri who are saying, Boy, I was paying out of pocket before
and I am not now, so maybe we ought to really get a total of the
number of people in the country who would lose benefits if we went
back to square one.
Dr. MCCLELLAN. That is many millions of people who would lose
benefits
Senator TALENT. Because that is the balance on the other hand.
I mean, it is good to have a hearing on the problems, and I have
been living with that because I have been out, as you know
Dr. MCCLELLAN. I know you have.
Senator TALENT [continuing]. Because I have called you from the
road on some occasions where I had cell phone coverage, and I have
been living with some of those issues, also. But we have to have
the balance and realize why we did all this and what is going to
happen if we go back to square one with it.
Let me ask you a couple of questions. I am going to submit more
for the record. One, and I have taken some real-life questions from
people who have had issues. This one lady is trying to find out
whether a particularly rather exotic and necessary drug that she
has been taking since July of last year is covered under the plan
that she was auto-enrolled in and she is having trouble getting a
response from CMS. We hear about this. I mean, I hear some people say, I called, I got through, no problem. Then I have other
people who say, We are getting a run-around.
How big is the problem, in your judgment, for people who are
calling CMS and what is the difficulty? Is it that during peak hours
everybody is calling and not enough on off-hours or whatever?
The second point that was raised with me, I thought was a very
good one, and maybe we need to do this rather than you, but the
Agencies on Aging have done heroic work on this, the senior centers
Dr. MCCLELLAN. Yes, absolutely.
Senator TALENT. I mean, I dont know how they rolled out Medicare originally without these, but they have just been tremendous
Dr. MCCLELLAN. Absolutely.
Senator TALENT [continuing]. Just great about it and so constructive, and they have had to put a lot of time and effort into it. I
wonder, do you have any plans, or do we need to do this legislatively, to maybe help compensate them because they really put an
enormous amount of effort. They didnt do it to get money from the
government. They did it to help the seniors. But it would be good
to compensate these because they have spent a lot of time and effort on it, and that was raised with me.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00076

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

73
Do you want to comment on those two, and then I will submit
the other questions?
Dr. MCCLELLAN. Absolutely, Senator, and thank you for all your
effort. I appreciate the phone conversations and keeping in close
touch about how things are working on the ground in Missouri.
Senator TALENT. That is very polite of you, because I have called
up to complain on occasions
Dr. MCCLELLAN. That is no problem. It is part of the job. The
Area Agencies on Aging, senior centers, other local partners, we
have tens of thousands of them around the country, are doing a
huge amount of work to help people find out about the new benefits
and take advantage of it and they really are a tremendous resource. They are helping people get through. They hear a lot of
things. My gosh, there are a lot of plans. What does this mean for
me? They turn it into, practically, you know, here is the plan that
is relevant for you. Here is how you can sign up and save money
in just a matter of minutes. They are helping around the country
millions of seniors do that.
We have doubled our budget for supporting the State Health Insurance Assistance Programs. We have enhanced our collaborations
with the Administration on Aging, which provides funding and enhanced funding for many of these groups. We are also adding to
this effort with a grassroots network around the country. There are
many faith-based organizations, many advocacy organizations,
many seniors organizations that dont get government funding but
now are working more closely together with these federally and
State and locally sponsored groups than ever before. In States
where this has happened most successfully, it has really taken a
lot of the load off these Area Agencies on Aging to enhance and extend their resources substantially, so we truly value their support
and we are going to continue this higher level of funding.
Senator TALENT. It has really validated the Older Americans Act
structure, Mr. Chairman
Dr. MCCLELLAN. Oh, absolutely.
Senator TALENT [continuing]. Because they have just been absolutely essential. I am sorry, 30 seconds. I know others have the
same issue. My pharmacists are less concerned about what they do
with transition issues. Obviously, they are concerned because people need to get the pharmaceuticals they need to get reimbursed,
but the way the system is set up, independent pharmacies in smaller towns are going to be at a structural disadvantage in terms of
reimbursement. You and I have talked about this. Tell me what
your thinking is on it now and maybe what we can do to help them
that will not undermine the basic structure of law, and then I am
done. Thank you.
Dr. MCCLELLAN. The community pharmacists are doing terrific
work, especially in rural communities. From hearing from them,
there are several things that we know that we can do to help that
I think they would find useful. One of them is making sure that
the contracts that the plans have with the pharmacies are enforced, and that includes also other requirements like network requirements. In many of these rural communities, as some of you
have mentioned, there is just one pharmacy there. Maybe Senator
Salazar mentioned it. They are the main focus of support in the

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00077

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

74
community. Well, those pharmacies need to be part of the network
in order for the plans to meet our access requirements under the
drug benefit. So we will make sure that the plans meet the access
requirements and that means that they are going to have to pay
the pharmacies enough for them to meet their costs and participate
in the program.
Also, many of the community pharmacies have faced added burdens because of differences in the messages that they are getting
from the different plans because they may not have been able to
use all the support tools that we have set up and we intend to be
available for every pharmacy right off the bat. We have taken some
new steps to work with the software vendors and the other organizations that support these community pharmacists, as well, so that
we can help make sure they are able to continue to provide a high
level of service.
This is going to be an ongoing concern for us. This is a big
change in the way pharmacies bill, especially many community
pharmacies, a big change in the way their work process goes and
their business process goes. So I think the best thing for us to do
is to keep in close touch about these issues and make sure that we
are continuing to respond to the ideas that we hear out in the field
about making the benefit work as smoothly as possible.
The CHAIRMAN. With the indulgence of my colleagues, the order
is next Senator Burns and Senator Martinez. Senator Nelson has
one burning question and needs to be across town in a minute. Do
you mind if he asks that first?
Senator BURNS. Let him burn the barn down.
The CHAIRMAN. All right. Senator Nelson?
Senator NELSON. Thank you to my colleagues. This is just a follow-up to the earlier conversation. Dr. McClellan, could you tell us
for the record CMSs, your shops, position with regard to extending
the Medicare deadline for 2006 and also whether CMS supports allowing seniors to change plans once during 2006 if they make a
mistake?
Dr. MCCLELLAN. Senator, we are not supporting that legislation
at this time. What we are focused on right now are the main topics
that have already come up at this hearing, which is to make sure
that everyone is able to take advantage of the new coverage, and
we have seen a lot of progress on that because we have identified
the problems, have been taking steps to fix them, and we are
seeing millions of prescriptions getting filled. We are seeing tens of
thousands of people signing up every day. That is still the No. 1
topic on calls to 1800MEDICARE. We are helping people find out
about what the coverage means for them and sign up in a matter
of minutes. So anybody who has questions calls at 1800MEDICARE and go to the many events going on around the State of
Florida right now to find out about the coverage.
So that is where we are focused right now. I am sure we are
going to have a lot more discussions about this in the days and
weeks ahead, though.
Senator NELSON. Thank you, Mr. Chairman. We are going to
take this issue up later today in the amendments to the tax reconciliation bill, and thank you to my colleagues for your kind opportunity for me to ask the question.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00078

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

75
The CHAIRMAN. Thank you, Senator Nelson.
Senator Burns.
Senator BURNS. Thank you, Mr. Chairman.
I asked the question a while ago as far as what actions we take
as Congressional offices and our attitude toward the program and
why it is so important. I go back to the days when they issued the
card, you know, the drug card. The rhetoric was so negative that
a lot of people did not even attempt to go sign up for their discount
card and therefore went and paid a lot of money out of their pockets when they could have been saving about $600 a year
Dr. MCCLELLAN. Or more.
Senator BURNS [continuing]. Or more, because they were afraid
of it. So I think the way we approach this will not only decide the
fate of the program, but it will also provide seniors with some confidence that this is designed for them, and as we see glitches along
the line, we will fix those. That is a point of legitimate debate here
as a policymaker goes. So that is why I said that a while ago just
absolutely throwing it out and saying, well, it is a bad program and
then scare them further does not accomplish a great deal if this is
for the benefit of them, and that is the reason I asked for that. I
still say thatand we have got to have some way as Congressional,
but I will say that the resource centers, senior citizen centers in
Montana have been marvelous and that works.
Now, we have a little different circumstance in Montana. How
about my reservations? When we say rural areas, Dr. McClellan,
as you know, in Montana, we have got a lot of dirt between light
bulbs out there and these smaller rural pharmacies have a hard
time making a go of it in our smaller farm communities and now
they are asked to do some things that sometimes puts a real financial burden on them. It was my understanding that that commitment had been made, and I think it has been, but we have got to
make sure of that.
Have we made any kind of an effort by your office for an outreach to my reservations, because as you know, we are dealing in
a different kind of a circumstance there than we are, say, with the
average Montanan?
Dr. MCCLELLAN. Absolutely. I have participated in a number
meetings with tribal leaders from around the country, including
representatives from some of the tribes in Montana. The drug benefit is for people who are Native Americans, who are Alaska Natives, just as much as for any other beneficiary in the program. The
drug plans have to offer contracts to the pharmacies on the tribal
lands. Many of the plans are now serving people in Indian country
and I am going to continue monitoring that very closely to make
sure that we work outthere are some special issues in how, for
example, Indian Health Service Funds interact with the drug benefit. But people who are living in tribal lands definitely should pay
attention to this program. It can be real help for them, just as
much as any other American, in lowering their drug costs.
Senator BURNS. We are going to start a program of outreach to
those reservations and I would ask if you can have some resources,
maybe some people or something that we couldand if you have
done some real background work on it, that is most helpful.
Dr. MCCLELLAN. We can.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00079

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

76
Senator BURNS. That outreach, I think, is really needed. I was
talking to the Chairman of all the reservations that I have in Montana the other day and that seemed to be a topic of discussion. Of
course, sometimes, you know, their people, they have a communications problem, too. We all have communications problems. So that
outreach is very, very important. So we will be in touch with you
and I thank you for your testimony here today. You have clarified
a lot of stuff as far as I am concerned.
But how can we benefit you? What role do you see we should
play in carrying that message and to make this work? We want to
make it work to the maximum if we possibly can.
Dr. MCCLELLAN. I think your continued close work with us on
identifying problems and letting us know about it. One of the
things I have been most impressed with is the way that district
staffs, the local staffs of your offices, have worked closely with our
regional offices around the country when you identify someone who
has a problem to get them into our casework system and get that
problem fixed, and also to enable us to solve any systematic problems.
You know, we talked a little bit earlier about this very big concern I have about a particular group of people who are dually eligible, who have Medicare and Medicaid and were previously getting
their drug coverage from Medicaid, who we are working right now
to make sure they can all take advantage of the coverage effectively. That has been our biggest concern.
For the vast majority of seniors who sign up for this coverage,
I think the main thing for them to know is if you give it a little
bit of lead time, things will work very smoothly. So for a typical
senior signing up, they can save half on their drug costs or more.
There are lots of places they can go in Montana and every place
else for help. About a week after they enroll, they will get a letter
in the mail from their drug plan. Keep that until you get your drug
plan I.D. card, which will come in a few weeks. If you allow that
couple of weeks or so between when you sign up for the coverage
and when you start to use it, you are likely to have a very good,
smooth experience the first time you use your coverage and you are
going to start saving on your medicines and have that peace of
mind from drug coverage, which is a new thing in Medicare.
Senator BURNS. The only thing I am trying to do is cut down on
the number of phone lines I am going to have to have to make it
work. But we want to work with you and we want to work with
the seniors because I dont want them left behind. I dont want
anybody left out of this program that can take advantage of this
program because it is designed for them
Dr. MCCLELLAN. That is right.
Senator BURNS. To get it in place. Then if we have got some
problems later on, then let us tackle those problems.
Thank you, Mr. Chairman, very much.
The CHAIRMAN. Thanks, Senator Burns.
Senator Martinez.
Senator MARTINEZ. Thank you, Mr. Chairman.
Dr. McClellan, we appreciate your being here today
Dr. MCCLELLAN. Thank you, Senator.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00080

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

77
Senator MARTINEZ. All the work that you are doing to make this
program be a success, which I know it will be in time. It is already
a success, but even a better success in time.
In my State of Florida, we have many nursing home residents
and a number of them, quite a number of them, in fact, are part
of the dual-eligible population and were auto-enrolled in Part D
programs. However, many of the programs they were enrolled in do
not cover the drugs that they need. Under the Federal and State
regulations, nursing homes are responsible for providing prescription drugs to their residents, but they are prohibited by Part D
marketing guidelines from helping dual-eligibles choose a plan that
meets their needs.
So will CMS consider revising its regulations to allow nursing
home professionals or pharmacists to assist residents in selecting
Part D plans designed to meet their needs?
Dr. MCCLELLAN. Thank you very much, Senator, for asking that
question. The nursing home administrators and staff, the long-term
care pharmacy staff in the nursing homes are a great resource for
information about the new drug coverage and they are working
very hard with us to help all nursing home beneficiaries take advantage of it. This is a big help for many people in nursing homes
and many States. The Medicaid payment rates have not been good
and many of the other nursing home residents are spending thousands of dollars of their own money on prescriptions, so this is a
very important benefit for them and we want it to work.
Our guidelines, and just to clarify this, do allow nursing home
administrators and pharmacists to provide objective information
about the drug plans. We try to draw the line with steering. So
there may be a particular plan thata drug the pharmacist may
like that is OK from the pharmacists standpoint, but when you are
advising a beneficiary, it is important to use objective information,
like what the beneficiarys costs are going to be, whether their current drugs are all on the formulary. Things like that are absolutely
fine for the nursing home administrators, other nursing home staff
to talk to their beneficiaries about.
If we need to clarify this further with some of the nursing homes
in the State, I would be delighted to work with you on doing so.
We have worked very closely with many of the nursing home associations, ACA, ASA, the Alliance, and others to make sure people
in the nursing homes know what they are allowed to do, and they
are allowed to provide objective information to help people choose
a plan. They just cant steer based on financial, you know, direct
financial incentives or something like that. But we want to make
this work for everyone in the nursing homes.
Senator MARTINEZ. As we run into problems on that, we may get
with you about seeing how we can break through, but
Dr. MCCLELLAN. We would be delighted to do that. We have an
ongoing outreach effort with the nursing home associations and
through our regional offices with the State and local associations,
weekly phone calls, things like that that we can use to help get any
needed clarifications out.
Senator MARTINEZ. Let me say, I want to say a good word for
your regional offices.
Dr. MCCLELLAN. Oh, they have been terrific.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00081

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

78
Senator MARTINEZ. We have worked very closely with them. They
have done a terrific job and have really been of assistance to our
folks as they have tried to help people with the program. We had
a series of meetings, as many others have done, to try to help folks
to get enrolled and so forth and they have been a real great resource and we appreciate it.
Dr. MCCLELLAN. I will take that back to them. Thank you, Senator.
Senator MARTINEZ. With the implementation of the Part D program, Medicaid coverage of prescription drugs for dual-eligible population was transferred to the Medicare prescription drug program.
Do you see any possibility of transferring those beneficiaries exclusively to Medicare so that all of their care would be under one roof
eventually?
Dr. MCCLELLAN. Well, it is a verythe advantages of coordinated care for dual-eligibles are obvious. They have some of the
highest costs in our health care system and have some of the highest rates of complications from medication interactions, from preventable complications like bedsores and other problems that lead
to hospital admission, worse outcomes, and higher cost.
There are a number of plans in Medicare now called special
needs plans that provide a broader range of services, including, in
many cases, coordination with the long-term care services in State
Medicaid programs. We are looking at ways that we can support
Medicaid and Medicare work more closely together to provide this
kind of coordinated care, and as you know, the State of Florida is
working with us on a new waiver program in Medicaid that would
give people with a disability and their caregivers more control over
how they can actually get these kinds of integrated services so it
is a lot easier to put some of the Medicaid traditional long-term
care support services together with coordinated care for medical
benefits and drug benefits with a reform program like Florida is
working on right now.
I dont know that there is going to be major legislation on this
right away, but I think under our demonstration authorities in
Medicare, with the new plans in Medicare and with steps like the
State of Florida is taking, there are some real opportunities to provide much better coordinated care with fewer complications and
lower costs to dual-eligibles. So we will pursue that with you, as
well.
Senator MARTINEZ. Sounds good. One last issue is the pharmacists and the State of Florida getting paid if plans take too long
in doing so, so we would be interested in seeing how you will monitor this once a reimbursement system is established to make sure
that timely payment is made to those that are due.
Dr. MCCLELLAN. We will be monitoring that closely. We have
had this time lag now as people switch from one payment system
to another that hopefully we are going to be getting past with the
checks really starting to go out last week, this week, and so forth,
but we will be monitoring that closely.
Senator MARTINEZ. Thank you. Thank you, Dr. McClellan.
The CHAIRMAN. Senator Wyden.
Senator WYDEN. Thank you very much, Mr. Chairman, and
thank you for all your leadership and Senator Kohls, and also a

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00082

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

79
bouquet to my colleague from Arkansas who is letting me go ahead
of her because we have got the intelligence stuff.
Senator LINCOLN. Oh, we love bouquets.
Senator WYDEN. You are gracious, as always.
Dr. McClellan, when I came to the Congress after being director
of the Gray Panthers for 7 years, I saw that a lot of senior citizens
would have a shoebox full of private health insurance policies. They
would have 10, 15, sometimes 20 policies. I wrote a law that
drained that swamp so that now there are essentially ten policies
in the private sector where people can actually compare the coverages one to another and actually use the market to make choices
for them.
I dont understand why CMS wont do that for this prescription
drug program. I refer you to the testimony of an Oregonian that
Senator Smith invited, Mr. Kenny, who advocates that. Let me tell
you what I think has been the consequence of your not using the
kind of approach I am talking about, that is senior friendly so that
older people can compare the choices. I think you have done great
damage during this roll-out to the cause of private sector choice in
American health care.
I voted for this program. I want to make it work. What has happened is instead of using an example like we had with these private policies sold to supplement Medicare, we now have in the
State of Oregon more than 70 choices, more than 70 choices. So
older people say they cant compare. They cant look and say, well,
maybe this one rather than that one.
So I think you ought to be moving in a hurry to make this more
user friendly, more understandable, and there is a model out there
right in front of you that you can use, the Medigap model for the
policies older people bought to supplement their Medicare. It is at
the last page of Mr. Kennys testimony where he specifically says
something like that would be helpful. Can we start on that right
away, trying to make sure that we do have innovation in the private sector. We are all for that. But making these choices more understandable and specifically will you support looking at this
Medigap kind of model?
Dr. MCCLELLAN. Well, Senator, I know how much you have
worked to make competition succeed for seniors and for other
Americans and I do want to keep working closely with you on improving how this program is working, as well. What we have seen
so far is more of a response from the private sector than many people, I think you and I included, expected there was going to be in
this program when the law was passed. That is why the law didnt
include, or may be one reason why the law didnt include these specific kinds of standards for types of plans.
The advantage of that is that we are seeing the costs come in
much lower and benefits come in better than expected. People can
now get drug coverage through Medicare that is better than the
standard Medigap policy drug coverage for about a tenth of the cost
of that Medigap drug coverage. So there are some real advantages
to the competition and choice that we have seen so far.
But I absolutely agree with you. I talk to a lot of these seniors
around the country, as well, that when they first approach this program and they havent had a chance to talk to a counselor or talk

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00083

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

80
to somebody at 1800MEDICARE about which choices are relevant for them and how they can find out how to take advantage
of the program, that can be a real challenge for them and we are
trying to break through that now. I do think, also, that now that
we have seen competition work to bring down costs and improve
choices, we are going to see competitive give seniors the next thing
they want, which is more simplicity and more understanding of
how these choices actually work, and we will be pushing that process along. I want to keep talking with you about the best way to
do that.
Senator WYDEN. I am still unclear why you think it doesnt make
sense for government to try to structure these choices for older people so that instead of 70 policiesI am not wedded to a specific
numberwe have whatever the number is so that people can actually sit at their kitchen table and compare them, because I dont
think that the private sector in and of itself is going to produce
more simple, more understandable policies. It didnt happen with
Medigap. It didnt happen. It happened because people like former
Senator Dole and the late Senator Heinz worked with me, and we
said that government and the private sector are going to structure
the choices. So I will ask you once again, are you saying you wont
look at that?
Dr. MCCLELLAN. I am saying that we do want to look at ways
to make it easier for people to makeeven easier for people to
make choices among plans.
Senator WYDEN. Even easier? It is bedlam out there. When you
use the word even easier, talk to Mr. Kenny who is 78 years old
about what his friends say.
Dr. MCCLELLAN. And I
Senator WYDEN. Older people are saying, you cant even sort this
out with an advanced degree. They dont say that with Medigap,
with their private policies to supplement Medicare
Dr. MCCLELLAN. I think looking toward simplification is absolutely the next step in this process, now that we have got the benefit in place. If we had tried to put in a standardized benefit back
when the law was passed, we would have ended up with a deductible with a doughnut hole with things that people clearly dont
want and they are not choosing now. We are seeing people choose
plans that have the kind of coverage they want and now we need
toI agree. We need to help them get to more simplicity. But I
think the drug plans are competing to do that, too, and that is
what we want to help along.
Senator WYDEN. I didnt propose a Medigap-type amendment to
this legislation for a reason, because I wanted the private sector to
have the first crack at it. But I didnt conceive that the roll-out in
the last few months would be bungled this way. I dont think it had
to be this way. I think you could have worked with the private sector without a law on a voluntary basis and persuaded them, look,
let us come up with some uniformity in the terms and make it possible for people to compare the choices. It could have been done voluntarily. It wasnt done voluntarily.
Now we have got a mess on our hands and I hope that you will
work with myself and others because I think it didnt have to be

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00084

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

81
this way. There is a model that could be an alternative. Read Mr.
Kennys statement. He calls for that in his testimony.
Thank you, Mr. Chairman.
The CHAIRMAN. Thank you, Senator Wyden.
Senator Lincoln.
Senator LINCOLN. Thank you, Mr. Chairman, and thanks for
holding such an important hearing today. Many of us have been
swamped by calls in our offices by our seniors and disabled across
the State who are truly frustrated about the, as you say, the
choices, which we do want choices, but certainly their ability to access the technical assistance they need to understand those choices,
so we appreciate your patience. I do, certainly. I am at the end of
the totem pole here.
Dr. MCCLELLAN. I appreciate all your
Senator LINCOLN. I voted for adding this prescription drug benefit to Medicare and I want it to work and I think I have demonstrated that. I have met with more thanover 3,000 seniors
across our State. We held meetings which your district division offices out of Dallas were very gracious in helping us with, trying to
make sure that we could be prepared and that people would have
the knowledge and information they needed to make wise choices.
We could quickly see that it was difficult. In time, I came back
to Washington and joined my colleagues, concerned about the short
6-week transition period for particularly our dual-eligible beneficiaries. I had hoped that we could work with you to make that
transition period longer. It is hard to believe that while everyone
else on Medicare was given 6 months to make that transition, this
group of individuals, which often can be considered some of the
most at risk, perhaps, were given only 6 weeks. So I hope that as
we move forward and we look for ways to improve on this legislation, as we did with the extension of that transition period, that as
opposed to fighting, our deep desire is that you will work with us
to look at the ways we can correct.
If there is anything that we did in moving into this proposal, and
I think many of us that have supported it and want to continue to
support the effort, is that we dont look at it as a work of art but
a work in progress and that we can recognize the things that we
can do better and that you will work with us in Congress to change
those in a way that will make a difference.
As I said, these are beneficiaries that are, in many instances, our
most vulnerable, and in Arkansas, it is a disproportionate share, a
greater share of our seniors that fall into that category, and, as is
the Arkansas way, our pharmacists, our medical providers have
been working diligently to make sure that these individuals who
are their neighbors and their friends in the community are going
to get what they need.
I guess what we want to know from you is how we can, and you
particularly at CMS, can continue to make these individuals, particularly our pharmacists, whole.
My office has received a tremendous number of calls from pharmacists who are concerned about the timing of their reimbursement
Dr. MCCLELLAN. Right.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00085

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

82
Senator LINCOLN [continuing]. From these prescription drug
plans. The plans have in their contracts that they will be reimbursed every 2 weeks, and yet when the pharmacists finally make
contact with the plans, one, they are not able to negotiate anything
with them, and they are told that they wont get their payments
in 2 weeks. It is crazy. I mean, I know that some of the larger
pharmacy groups out there have got the technology and the capability to overcome that. They also have the resources to be able to
make it through that period of time, but a lotas Senator Burns
mentioned, in rural America, your local pharmacists dont have
that.
I have had at least three of my pharmacists call and say they
have had to take out a loan from the bank in order to make it
through and pay their suppliers and that is just inexcusable. I
mean, these are people who are dedicated to their constituency and
their customers and their community, and to take out a $500,000
loan just to make it through the month is something that, in my
opinion, is not only unintended in this legislation, but it is unacceptable. So I hope that as we have led seniors to the doorstep of
this opportunity of a new prescription drug component that we will
not leave them or the people that serve them at that doorstep.
I guess my question to you is, what are you going to do in terms
of the timing of this? Arkansas to date has spent about $3.8 million
now, almost $4 million. You say you want to make it all whole, and
I want to believe you on that, but I also think that the timing on
this is incredibly important. I mean, are you going to guarantee us
in 30 days that these people are going to be paid? Are you going
to go back to these plans and be an advocate on their behalf?
Dr. MCCLELLAN. First of all, Senator, I would like to thank you
for all your close work with us on the implementation of the benefit. As you mentioned, your office is working closely with our regional office, answering peoples questions, helping any individuals
who are having difficulty, and helping more people enroll. I think
that is why Arkansas has one of the highest rates in the Nation
of enrolling in this program
Senator LINCOLN. We want it to work.
Dr. MCCLELLAN [continuing]. The program is having a big impact for people in the State who have been struggling with their
drug costs. The State is going to be reimbursed. We have been in
very frequent contact with Governor Huckabee, who has been a
real leader on this issue and helping pharmacists, that we are having difficulty at the beginning and in working with us on getting
an effective reimbursement plan in place. So the State is going to
be reimbursed for those costs. But I want
Senator LINCOLN. Do we know the timing on that?
Dr. MCCLELLAN. Well, the modelwe are releasing a specific
template, just a checklist. That is all the State has to fill out in
order to get into this reimbursement program. That will be available as soon as today. We hope that the States like Arkansas will
be able to quickly complete this agreement with us and then the
reimbursement process will actually involve the State sending us
the claims that they have that they havent been ablewhere the
pharmacist couldnt bill the Medicare plan properly and we will do
the reconciliation with the drug plans and we will also pay for any

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00086

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

83
additional costs to the extent that any competitive drug plans come
in at a lower cost than Medicaid. We will make that up, as well.
But I want to talk about the pharmacists specifically
Senator LINCOLN. Good.
Dr. MCCLELLAN [continuing]. Because they do have a timing
issue, and I have heard that from talking to many of these independent pharmacies around the country and their associations.
They went from being paid by Medicaid, often on a weekly basis,
to these contracts that you mentioned which often have 15-day payment cycles. Some of them are less. Some of them are less. Some
of them are 10 days. Some of them are a little bit longer. Those
checks are just now starting to come in. In the meantime, it has
been a real stretch for many of the community pharmacies to meet
their short-term expenses and to pay the distributors and others.
We have been in contact with basically everyone involved in the
whole pharmacy drug distribution chain, the wholesalers and others. Many of them have relaxed the terms for payments during this
transitional period to help pharmacists through that process, and
now, now that those contract terms are coming due, we are watching very closely to make sure that the plans do pay on schedule so
that they can get those costs covered and get through this transitional period.
Senator LINCOLN. Do you feel like you have the sufficient authority to regulate the plans?
Dr. MCCLELLAN. The plans have contracts with the pharmacies
and
Senator LINCOLN. But they wont negotiate with them. They
wont talk to them.
Dr. MCCLELLAN. Well, our regulatory authority goes to making
sure that plans meet our standards for having access to pharmacies. So if a pharmacy, especially in a rural area, it is the only
pharmacy around, isnt getting a rate that they think is acceptable
and permits them to serve Medicare beneficiaries, if they dont participate, the plan wont meet our standards for having
Senator LINCOLN. So do they go through an appeals process? I
mean, is that what you have in place?
Dr. MCCLELLAN. Well, the plan wouldnt even get approved if it
doesnt meet our pharmacy access standards.
Senator LINCOLN. But the point is if they are not meeting that
and they are still the plan that exists for that individual, that constituent, what is the pharmacistwhat do they have? What power
do they have? Do they have an appeals process? Do they come to
you and say, this plan is not adhering to the contract?
Dr. MCCLELLAN. If it is not adhering to the
Senator LINCOLN. Are you going to fight that contract for them?
Dr. MCCLELLAN. If it is not adhering to the contract, we want to
hear about any complaints about failure to adhere to contracts
and
Senator LINCOLN. That is what they have been doing, is calling
you about the timeliness.
Dr. MCCLELLAN. Well, we will take action, and we have heard
about a few of these already. Some of the ones that we have seen
so far were cases where the plan submitted, the pharmacy submitted its claims for services delivered, say, in the first couple

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00087

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

84
weeks of January. Then the plan has 15 days to pay and those
checks are starting to go out now. We have this transitional issue.
So we are watching very closely to make sure that happens the
way it is supposed to happen, and if we see any systematic pattern
of complaints about plans not following their pharmacy contract,
we absolutely are going to follow up on that with the plans. We
have specific compliance
Senator LINCOLN. So you feel you have enough authority
Dr. MCCLELLAN. We have specific compliance staff and compliance officers and specific contacts on compliance issues with the
plans to make sure they are adhering to the contract terms.
Senator LINCOLN. You feel comfortable that you have enough authority and enough individuals on point to do that?
Dr. MCCLELLAN. At this point, we do. We are watching complaints that come in and making sure that contracts are being adhered to, and if wewe will let you know if there end up being bigger problems
Senator LINCOLN. Where could I or a pharmacist get more information about these contracts?
Dr. MCCLELLAN. The contracts between the plans and the pharmacies are filed. Plans have to make available a contract for any
pharmacy that potentially wants to do business with them. There
is an any willing pharmacy provision, and in order to meet our
pharmacy access standards, the plans must have pharmacies available and convenient access for all of their beneficiaries. The plans
have filed information with us showing that they have got a standard contract
Senator LINCOLN. So the pharmacists call CMS to get that contract?
Dr. MCCLELLAN. Well, the pharmacists will have that contract
directly because they have entered into the contract with the plan.
So they have got their contract information directly and what we
want to know about is, is a plan failing to adhere to the terms of
their contract
Senator LINCOLN. OK, and so
Dr. MCCLELLAN [continuing]. That is something that the pharmacist is
Senator LINCOLN [continuing]. Hopefully, you are the one that
will help them as an advocate if there is a problem.
Dr. MCCLELLAN. Yes, as well as the pharmacy associations often
help with these contractual issues with plans and we do want to
provide some assistance, as well.
Senator LINCOLN. We also have a State law
Dr. MCCLELLAN. If I could just add one more issue on this topic,
early on, especially, the pharmacists were having real trouble sorting out billing issues because they couldnt get through to plans or
couldnt get through to us.
Senator LINCOLN. Yes.
Dr. MCCLELLAN. As I said already in this hearing, we have taken
some major steps to make sure any pharmacist can contact Medicare virtually immediately, with no waiting, on our toll-free pharmacist help line. That is working very smoothly now in terms of
quick access for pharmacists with questions or complaints. Pharmacies also should expect a high level of performance from the

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00088

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

85
drug plans. Many of the drug plans have taken some great steps
over the last several weeks to improve pharmacy access to them so
they can resolve any of these contract or payment issues, and we
expect all the plans to do that
Senator LINCOLN. There was definitely a big problem in contacting
Dr. MCCLELLAN [continuing]. That kind of smooth and direct
contact with the plans can also go a long way to helping with these
issues and that is why we are going to increase our monitoring of
plan performance on their pharmacy lines. Again, we have seen
lots of plans make big improvements. They are doing very well on
quick access
Senator LINCOLN. Their Washington offices probably called in,
because I found when I couldnt get hold of you or to somebody in
CMS that could answer my question, I called their government relations office here in Washington and started sending my constituents to them because the questions there just simply were inexcusable in terms of being required to pay deductibles and copays and
other things that were clearly out of sync with what we had produced in the legislation.
Dr. MCCLELLAN. I am glad we are seeing progress there, but we
are going to obviously keep watching this very closely until all
these problems are fixed.
Senator LINCOLN. We have sent you a letter. Arkansas has a
State law that allows patients to choose their own pharmacy. In
long-term care settings, we are one of the few States which has historically interpreted the rule to allow each individual to decide
which pharmacy they want to use. We sent you a letter on the
ninth of January hoping that you could promptly clarify the intent
of the patients rights to choose a pharmacy as it exists under State
laws. Can you give me an indication when I might get some guidance issued from you?
Dr. MCCLELLAN. I can. In fact, we have been working directly
with community pharmacists on this. We have had an exchange of
letters with the National Community Pharmacy Association to
make clear a couple of things. One, we do expect some standards
for long-term care pharmacies and plans that are contracting with
them to meet. Basically, a plan must support the required level of
services for a long-term care pharmacy and it must provide access
to needed long-term care pharmacy services for every beneficiary in
the plan, whichever long-term care pharmacy they happen to be
using.
We have also made clear in this exchange of letters that the
plansthat there is no restriction in our policy on which pharmacies a nursing home can contract with to provide services. In
fact, in a number of States, we are seeing more competition where
community pharmacies are taking advantage of the fact that we
are trying to set up a level playing field here to supply access to
services and pharmacies.
So there is nothing in our rules that prohibits beneficiaries from
getting the long-term care pharmacy choice that they need. It is
really more of an issue directly for the nursing home and we want
the nursing homes to know that if they want or if their beneficiaries want to contact with or get their services from different

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00089

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

86
long-term care pharmacies, that is absolutely permitted under the
Medicare rules.
Senator LINCOLN. Or local?
Dr. MCCLELLAN. That is right.
Senator LINCOLN. Not just long-term, but local pharmacies, too.
Dr. MCCLELLAN. Local pharmacies. Obviously, local pharmacies,
too.
Senator LINCOLN. Just last, in the nursing home situation we
have in Arkansas, they say their pharmacies are still experiencing
a rejection rate of 25 percent. Twenty-five percent of the time, they
are getting rejected, and the plans are still charging copays to the
nursing home patients, which are actually prohibited, I think,
under the law.
Dr. MCCLELLAN. That is right, and this is an example
Senator LINCOLN. Can you tell me how you are addressing that?
Dr. MCCLELLAN [continuing]. I talked at the outset about this
being one of the biggest problems that we are working on right now
and that we are taking steps to fix. It has several sources. One is
making sure that the plans all have complete and accurate data on
the nursing home status of their beneficiaries and that they are
using it. To help make sure that happens, we have sent out the
complete lists of all the dual-eligible and low-income beneficiaries
in a plan to those plans. We most recently sent another list of this
information out on January 30. We also are handling casework and
complaint issues. So if we see a pattern of a specific plan not having the right copayment information in, we can go work directly
with that plan to try to get it addressed.
We still need to make more progress on this, but it is absolutely
one of our top priorities to make sure everyone has the correct copayment information, including the zero copay information in the
nursing homes
Senator LINCOLN. Well, I would just say that in enforcing these
plans and the policies, many of the pharmacists are reporting that
when they call the plans, the staff that are answering the queries
from the plan dont know about the policies.
Dr. MCCLELLAN. One of the technical issues that we have been
dealing with with certain plans over the last few weeks is that
there is aI dont want to get too technical here, but there is a
specific piece of information that we send out in the files that have
information on beneficiaries in the plans on the nursing home status of a beneficiary and we do want to make sure that all the plans
are using that. Most of them are using it just fine now, and we
have, again, double-checked to make sure they have got the right
information in place. So I think you should expect to see continued
progress on this, but you should keep letting us know if you are
seeing particular cases
Senator LINCOLN. Dont worry.
Dr. MCCLELLAN [continuing]. I know you will, but that is why
this is one of our very top issues for long-term care pharmacies
right now.
Senator LINCOLN. I just hope and pray that you wont be afraid
to make changes that need to be made in order to make this a success. There is clearly from so many of us, we realize that a prescription drug component of Medicare is essential, but I dont think

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00090

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

87
anybody has all the right answers and I hope that as we work
through this, we are willing to make the changes that need to be
made to make this a success. No pride of authorship or no, you
know, I dont know, possession, of possessiveness in terms of what
we have done here, but if we get it fixed and we can get it fixed
in a way that will sustain it as a program and not, again, lose the
confidence of the seniors out there, whether they are the dual-eligibles and the most vulnerable or whether they are those that are
healthy and yet going to be looking to Medicare in the future, to
engage in what we need to have them engage in, because participation is going to be critical in the long-term success of this.
So thank you for your help and I appreciate it. I know, Mr.
Chairman, if I may ask unanimous consent to include my statement in the record, I apologize for running late. But I do appreciate
working with you, and again, I hope you all keep answering your
phone lines because we are going to keep calling.
Dr. MCCLELLAN. We absolutely will, Senator.
Senator LINCOLN. OK, thanks.
Dr. MCCLELLAN. Thank you for your leadership and your passion. We have taken some new steps that we just announced yesterday on exactly these issues and we will keep making changes to
fix these problems.
Senator LINCOLN. I would say that you would get a resounding
applause here if you gave a greater emphasis on timing, because
that is what is killing people out there in the hinterlands.
Dr. MCCLELLAN. For the pharmacies, I know.
Senator LINCOLN. For the pharmacies, particularly, but the
States, as well, I mean, to have a better idea of when those resources are coming and when they can expect. If it is just setting
a deadline for yourself or for us, in a way, that we are going to
make sure that that happens within a certain period of time, it
gives them a great reassurance, not to mention the financial institutions that are backing them, so thank you.
The CHAIRMAN. Thank you very much.
[The prepared statement of Senator Lincoln follows:]
PREPARED STATEMENT

OF

SENATOR BLANCHE LINCOLN

Mr. Chairman, thank you for holding this important hearing today on the problems our constituents are having with the new Medicare prescription drug benefit,
or Part D.
I voted for adding this prescription drug benefit to Medicare, and I want it to
work. I know its not a perfect law, and I have voted several times in the last two
years to improve it. Last year, I and many of my colleagues grew concerned about
the short, six-week transition period for dual eligible beneficiaries, those 6.4 million Medicare beneficiaries who also qualify for Medicaid because they are low-income.
These beneficiaries are among the most vulnerable of Americas citizens. They are
disproportionately women and minorities and live alone or in nursing homes. Nearly
three quarters of them have an annual income of $10,000 or less. Thirty eight percent of them have a cognitive or mental impairment. Over a third of them are disabled. Less then half have graduated from high school. And, they use at least 10
more prescription drugs on average than non-dual eligible beneficiaries. They are
more likely to have chronic conditions like heart disease, pulmonary disease, or Alzheimers Disease.
While everyone else in Medicare was given six months to enroll in a prescription
drug plan, these dual eligible beneficiaries were given only six weeks. Moving 6.4 million seniors and individuals with disabilities to an entirely new system is a major
undertaking. Even MedPAC, an independent advisory committee, had warned that

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00091

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

88
even large, private employers need at least six months to transition their employees
drug coverage from one pharmacy benefit management company to another.
It is obvious that the dual eligible beneficiaries have experienced the most problems since January 1st, and I believe the problems they have had were entirely predictable. I voted to add six months to the transition period for this vulnerable population, but officials from the Centers for Medicare and Medicaid Services said that
our amendment was unnecessary. They said that they were ready.
Since January 1st, my office has been swamped with calls from upset seniors and
pharmacists. Dual eligible seniors werent in the computer system, the phone lines
at the plans and at CMS were jammed, and pharmacists were uniformed of the various processes they needed to use. Seniors were placed in plans that did not cover
their specific medications and were told to pay high deductibles and co-pays that
they werent allowed to be charged under the Medicare law. Pharmacists are not
getting paid on time and have to take out loans to pay their bills and keep their
doors open. Half the states, including Arkansas, have had to step in and fill in the
blanks where CMSs transition plan has failed.
These problems could have been avoided. I feel that the administration failed to
fully prepare for the implementation of this new program even after repeated warnings from me and other members of Congress. But, now that we are in this situation, we must fix it. The government must not leave our most vulnerable seniors
at the doorstep to fend for themselves. I want to work with CMS to fix these problems and avoid them in the future. This hearing and other hearings are a necessary
part of that process. Thank you, Mr. Chairman.
The CHAIRMAN. Dr. McClellan and Linda McMahon, as you can

see, notwithstanding all that is going on in this world, this is what

is going on in our communities.
Senator LINCOLN. That is right.
The CHAIRMAN. You have been on the hot seat and we thank you
for your candor and your participation here, and with that, we will
call up the next panel.
Many of my colleagues have been pulled in different directions,
but we do want to hear from all of you who are on these panels
because what you have to say is important to the Senate record.
This is being broadcast by CSPAN and there are undoubtedly
many seniors who are anxious to hear what is being said this
morning and your testimony, as well.
Bob Kenny is the first witness of the second panel. He is a Medicare beneficiary who hails from my home State of Oregon. He is
from Tillamook. No doubt many viewers have been eating cheese
from that area. He used the Internet to enroll in the prescription
drug plan, and as a volunteer with the State Senior Health Insurance Benefits Assistance Program helped many other seniors enroll, as well. He will share his experience and offer his insight on
how the drug benefit program has been working so far.
He will be followed by Mr. Mike Donato, who is a dual-eligible
beneficiary from Mansfield, OH. Mr. Donato previously received his
prescription drug coverage through Medicaid. He will share with us
his experience with the new Medicare drug benefit thus far.
Then we will hear from Sharon Farr, who is Mr. Donatos counselor, and she will be discussing her role at the Center for Individual and Family Services.
Bob, welcome. Thank you for being here.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00092

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

89
STATEMENT OF ROBERT J. KENNY, MEDICARE PART D.
BENEFICIARY, TILLAMOOK, OR

Mr. KENNY. Good morning, Mr. Chairman, Senator Kohl. I am

delighted to be here today to give the message that there really are
successful sign-ups for Medicare D. I work with Medicare D both
on a personal basis and as a volunteer for the Senior Health Insurance Benefits Assistance program, SHIBA.
At 78 years of age, I have recently undergone a triple bypass operation and have mild emphysema. My drug cost would be about
$300 a month without Medicare D. With my Medicare D prescription plan, my total cost, including premium, will be cut to $141 a
month, a savings of 53 percent, or a total of $1,908 a year. In addition, I just recently changed to a preferred drug from a non-preferred and will save an additional $30 a month that way, and I
plan to save more money by going into mail order.
How did I go about signing up? Because of my SHIBA training,
I knew the shortest route would be to use the government website
Medicare.gov. I went to that site armed with my list of six prescription drugs and my Medicare card. The site was new to me, so I did
site exploring and then started in earnest. I told the site that I
wanted to compare plans, filled in the personal information and
after that my drug usage. It was time consuming, about threequarters of an hour. The comparison showed the plans from the
least to the most expensive with the yearly cost for each. I checked
pharmacies to make sure mine was included and identified the parent company of the plan as a stable firm. In addition, I went over
the math to verify the yearly cost figure. Having decided that the
lowest-cost plan was acceptable, I enrolled.
My membership card arrived in a little over 2 weeks. Shortly
after January 1, I registered my plan with my pharmacy and ordered medication. The medication was quickly approved and provided at the proper discounted price. Since that time, I have filled
more prescriptions with the same results.
I am sure that my good results in some measure reflected my
half-day Medicare D training and my computer savvy.
My work as a SHIBA volunteer began in 1993. According to the
last census, my county of Tillamook in Oregon has a population
with 19.8 percent seniors as compared to 12.4 percent for the U.S.
as a whole. I have counseled about 30 Medicare D patients since
mid-November. The seniors that come to me for Medicare D are
often very confused by the publicity that tells them they should be
confused, or they have been talking to a plan salesman, or they
have been looking into plans and are really confused.
In most cases, this confusion was either eliminated or considerably reduced by going through the steps required by Medicare.gov.
Few of my clients know how to use a computer, and those that do
may not have Internet access. At the end of the appointment, however, almost all were thrilled by the amount that they would save
in drug costs. There has been only one client of mine who found
there would be no reduction in her costs. She was a lady in extremely good health who did not spend enough to cover the $250
deductible. Even this lady decided to enroll anyway in order to
avoid the 1 percent per month penalty which would be added to her
premium if she did not enroll before May 15.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00093

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

90
Lest I paint too pretty a picture, I know there are real problems
in some areas. I work with the general population of seniors and
that has yielded good results. At the same time, I have heard from
those who work with dual-eligibles, those with Medicare and Medicaid, that they have seen serious difficulties in everything from
getting clients into the right plan to straightening out computer
records so medications could be dispensed.
In spite of all the real problems you are hearing about, Medicare
D is a good thing for an overwhelming proportion of those eligible.
In our county, there is even a plan available which will produce
savings with drug costs of as little as $35 a month. Not many seniors have drug costs that low.
The Medicare.gov website is, in my opinion, now doing a good job
leading people through the process. When the sign-up period started in November, it was often not available due to excess traffic,
had errors in plan information, and was much harder to use. Since
then, the information has been corrected, major improvements have
been made, and the site is both faster and easier to use.
In spite of my satisfaction with the results and a real conviction
that Medicare D is good for the elderly, it is obvious that improvements can be made. I would recommend to the committee the following changes be considered.
Provide a paper application for those that do not have computer
access, and by that I mean a paper application to apply for the
comparison. The actual enrollment is already available either by
phone or by paper application.
On the Medicare.gov website at present, medications and their
dosages must be entered one at a time in order to allow the program to make the notation. This results in a processing wait each
time a single drug or change in dosage is entered. It would be
much more efficient if all drugs and their dosages could be entered
at the same time, resulting in a single but longer wait.
Stop the auto-enrollment to reduce confusion and save manpower.
Standardize the formulary for all plans to provide improved comparability.
As with supplemental plans A through J, reduce the number of
prescription plans, not vendors, to a manageable number which can
be compared one to the other. If you think about it, that is already
almost in existence. It simply has not been categorized. If you look
at the plans, they already either do or do not cover the $250. They
either do or do not cover the doughnut hole. They either do or do
not have mailhouse pharmacies. They either pay nothing for
generics or a small charge. The small charges are very close together. For non-generic drugs, they either pay 25 percent or they
have a fixed amount. Where it is a fixed amount, they are very
close together. So there would be very little change and very little
restriction of competition to standardize the plans.
There are more than 4,800 seniors in Tillamook County. Only
about 500 of these have been helped, mostly because most of them
do not know where to go for help. My schedule is now running
empty. We could nationally provide local TV and radio announcements giving the telephone number of the closest SHIBA office or

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00094

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

91
its equivalent which can be called to get real help one-on-one in a
timely manner.
Thank you.
The CHAIRMAN. Thank you very much, Bob. That is a terrific real
world experience and some suggestions that we will certainly take
to heart. We have a hearing in the Finance Committee next week
on this same topic and I am going to grab your testimony and push
your ideas. It is very good of you to come this long way to participate in this important discussion.
Mr. KENNY. Thank you for having me.
[The prepared statement of Mr. Kenny follows:]

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00095

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00096

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.042

92

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00097

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.043

93

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00098

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.044

94

95
The CHAIRMAN. Mr. Donato.
STATEMENT OF MICHAEL DONATO, MEDICARE PART D
BENEFICIARY, MANSFIELD, OH

Mr. DONATO. Hi, Senator Smith. My name is Mike Donato. I live

with my mom, Daisy, in Mansfield, OH. I was diagnosed with
schizophrenia and bipolar disorder in 1995. I have been on the Social Security Disability program since then.
Senator, I take medications for many health problems, everything from asthma to high blood pressure. I particularly depend on
mental health drugs to live in the community with my friends and
family. When I am not on medications, I tend to get sick and end
up in the emergency room or the hospital. This is my first time in
Washington, DC and I dont want to offend anybody, but it is fair
to say I dont like hospitals. Nice people, but the food is pretty bad.
I would say that things got off to a pretty rocky start with this
new Medicare drug program. For example, I am in an AARP plan,
but I never got a letter from them. Sharon Farr from the Center
for Individual and Family Services, had to find my enrollment online. In fact, she has been helping me a lot these past few weeks.
You will hear from her in a moment.
When I went to Walgreens in early January to get my prescriptions filled, they said I owed them a total of $700. I was afraid and,
honestly, pretty panicked, Senator Smith. Where I come from, that
is a great deal of money. Most of all, though, I was worried about
my mom. Daisy was very nervous about what would happen to me
if I couldnt get my medications. Lord knows she doesnt have the
money to buy all my drugs I need to live.
Today, I sit here feeling pretty lucky. Now that Sharon has got
me enrolled in this new Part D program and we have ironed out
all the problems, I can take all nine of my medications I need for
the very first time. I was never able to do that under Medicaid. I
also know for a fact that I couldnt have handled all this without
Sharons help.
But what about the seniors? What happens to people who dont
have the help I had? I hope you will give them the assistance they
need. I think Daisy feels the same way.
Thanks for having me here. I will answer your questions the best
I can.
The CHAIRMAN. Thank you, Michael. I dont have a question. I
justyou are a living example that this is a program that is working for you. For all the problems you have heard spoken of this
morning, it is obviously worth the effort and the struggle to keep
getting this program implemented and get it right.
Mr. DONATO. I agree.
The CHAIRMAN. Thank you.
[The prepared statement of Mr. Donato follows:]

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00099

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00100

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.045

96

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00101

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.046

97

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00102

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.047

98

99
The CHAIRMAN. Sharon Farr.
STATEMENT OF SHARON FARR, ACCOUNTS RECEIVABLE
SUPERVISOR, CENTER FOR INDIVIDUAL AND FAMILY SERVICES, MANSFIELD, OH

Ms. FARR. Good afternoon, Chairman Smith and members of the

committee. My name is Sharon Farr. I am an accounts receivable
supervisor at the Center for Individual and Family Services in
Mansfield, OH. I supervise a staff of five case managers working
with 140 persons with serious mental illnesses eligible for both
Medicare and Medicaid who qualify for the new Part D prescription
drug benefit. Today, I will briefly outline some significant challenges that one of my clients, Mike Donato, and many other dualeligibles with mental disorders, are experiencing with the new
Medicare prescription drug benefit.
Let us focus on Mikes case for just a moment. As you just heard,
he takes medication for nine health conditions, including schizophrenia, bipolar disorder, diabetes, asthma, and high blood pressure. In late 2005, Mike was auto-enrolled into AARP prescription
drug plan. When he attempted to get his prescriptions filled in
early January, Mike did not appear in the Walgreens computer
system as dual-eligible. The pharmacy charged him a $250 deductible plus the copayment for all the medication Mike takes, about
$700 in all. It is very important to note that his Social Security
Disability check amounts to $694 per month for all his living expenses. Mikes mother stepped into the situation at that point and
gave him $67 so he could at least purchase his mental health medication.
When I contacted AARP, I was told to wait 48 hours and a computer glitch would be corrected, but nothing happened after 2 days.
I then began calling the Center for Medicare and Medicaid services,
AARP, and Walgreens, all with the objective of enrolling Mike as
a dual-eligible so we could qualify for subsidies due him. I was calling these organizations three times a day for a solid week. At one
point, I was on the phone for 312 hours and endured multiple
phone cutoffs. Meanwhile, the AARP website had no mechanism of
identifying dual-eligibles upon enrollment.
By the way, Community Mental Health Centers across the country are reporting very similar experiences, particularly with respect
to PDP prior authorization processes. Many consumers who, for example, are stabilized on anti-psychotic medications now find that
the same drug is subject to PDP fail-first policies, requiring case
managers to navigate often confusing new systems.
Finally, 3 weeks after his Part D odyssey began, Mike showed up
in the Walgreens computer system as dual-eligible. Mr. Chairman,
I dont mind telling you that we had a little celebration. Mike can
now afford all nine drugs in his medication regimen, which is
something he could not do under the Medicaid program. Walgreens
was very accommodating through the process and even refunded
Mikes mother her $67.
Throughout this process, I have been working with both the National Alliance on Mental Illness and the National Council on Community Behavioral Health Care, who have provided invaluable assistance.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00103

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

100
Both NAMI and the National Council hope that CMS will successfully resolve the information technology problems that have
plagued Part D to date. In addition, our colleagues in the mental
health field, and including the American Psychiatric Association
the National Mental Health Association, insist that PDPs provide
a 30-day emergency supply of medications as required by the current CMS transition policy. It is also essential that CMS renew the
all or substantially all formulary guidance requiring broad coverage
of anti-psychotic, anti-depressant, and anti-convulsants for 2007
contract year and beyond. This is critically important to making
the drug benefit effective for people with severe mental illnesses.
In addition, as front-line safety net providers, we need a workable
and transparent exception process to ensure that dual-eligibles are
able to quickly access medications that are subject to prior authorization and step therapy.
In closing, there are some immediate issues that need the attention of Congress. For instance, CMHCs have found that copayment
structures for dual-eligibles is unwieldy and confusing. This requirement has generated thousands of additional visits to CMHCs
across the nation, and the tremendous staff time amounts to an unfunded mandate on safety net community mental health providers.
In fact, I estimate that my five case managers have spent 200 to
300 hours attempting to enroll dual-eligibles in the new benefit.
Moreover, people with Alzheimers disease, mental retardation, and
mental illness eligible for Part D need additional help, specifically
one-on-one pharmaceutical benefits counseling. The House and
Senate Appropriations Committee required CMS to provide additional assistance through the $150 million MMA education and outreach program, but it has not been materialized to date.
Thank you for listening. I look forward to answering any questions you may have.
The CHAIRMAN. Sharon, thank you very much for focusing on the
mental health component or category in all of this. It is very important to me that this not take a back seat to other prescription
drugs. I also thank you for serving and helping Michael.
[The prepared statement of Ms. Farr follows:]

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00104

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00105

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.048

101

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00106

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.049

102

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00107

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.050

103

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00108

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.051

104

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00109

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.052

105

106
The CHAIRMAN. Senator Kohl.
Senator KOHL. Thank you. Just a brief comment. I would first
like to thank both of our Medicare beneficiaries for traveling so far
to be here with us today and to make your comments. Mr. Kenny,
I am pleased that your experience in enrolling in the Medicare
drug benefit was a good one and that you have been able to counsel
others that dont have access to the resources that you do.
Mr. Donato, the Medicare drug benefits certainly should not be
an obstacle to proper health care, but as you have demonstrated,
that is exactly what it has been for too many Medicare beneficiaries. Of course, you are very fortunate to have a strong advocate working on your behalf.
However, with all due respect, Chairman Smith, the stories we
have heard today are far different from what I have been hearing
in my State of Wisconsin. Just this past Monday in Milwaukee,
Amy McHutchin, who is from the Wisconsin Coalition for Advocacy,
painted a far different picture and I want to quote something she
said to me.
She said, In just under a month, I have worked with numerous
Medicare beneficiaries with severe mental illness, recent organ
transplants, diabetes, and other life or death illnesses that have
had trouble accessing their medications. Many were turned away
from pharmacies empty-handed or left the pharmacies having
spent their months grocery or rent money for their medications.
The calls also seem to be much more urgent in nature as we near
the end of the month, where beneficiaries have no longer been able
to secure a temporary supply of medications from their pharmacy
and have been without their medications for several days. This is
an expert in Wisconsin who made that quote to me.
I share this with the committee because I want to be clear today.
For far too many people, this drug benefit has not worked properly
and we clearly have a responsibility to acknowledge them and to
focus and refocus our efforts on making sure the many challenges
people have been facing are adequately addressed and not in any
way papered over.
Mr. Chairman, I thank you.
The CHAIRMAN. Thank you. I am grateful to our second panel
and we will now call up our third.
The third panel will consist of Mr. Timothy Murphy of the Commonwealth of Massachusetts, Secretary of Health and Human
Services. His state was one of the first to implement a stop-gap
program to pay the costs of emergency supplies of medications for
beneficiaries. He will discuss the states role in the Medicare drug
benefit as well as its efforts to receive reimbursement from CMS
and drug plans for costs associated with its stop-gap program.
He will be followed by Ms. Sue Sutter. She is here representing
the Pharmacy Society of Wisconsin. Senator Kohl will introduce
her.
Then Mark Ganz, who is my friend and fellow Oregonian. He is
the CEO of the Regence Group and is representing the National
Blue Cross and Blue Shield Association. He will discuss his companys approach to implementation of the drug benefit, including
its work with pharmacies and other interested parties to resolve
problems encountered by beneficiaries.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00110

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

107
We thank all three of you for being here. Tim, take it away.
STATEMENT OF TIMOTHY R. MURPHY, SECRETARY, EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES, MASSACHUSETTS DEPARTMENT OF PUBLIC HEALTH, BOSTON, MA

Mr. MURPHY. Thank you, Chairman Smith and Senator Kohl, for
this opportunity to speak on this important issue. I also just wanted to introduce to the committee Beth Waldman, who is the Medicaid director for Massachusetts, who is joining me today, also with
Paul Jeffrey, who runs our pharmacy services, so if any questions
that we can answer for the committee.
I would also request, Mr. Chairman, that I just have my written
testimony put into the record.
The CHAIRMAN. We will include it.
Mr. MURPHY. What I have done for the committee is also prepared a presentation, which I believe you have, just to walk
through the Massachusetts experience.
Just by way of background, what you should know about Massachusetts is that we have two programs. One is obviously for the
Medicaid or the dual-eligibles, and then we also have a State Pharmacy Assistance Program called Prescription Advantage, which is
a very successful program. We serve in Massachusetts on our Medicaid program about a million people. It is about 17 percent of our
population. Our dual-eligibles are about 190,000 individuals. Just
to give some percentages on that, it is about 51 percent elderly and
49 percent are disabled. Our Prescription Advantage, or our SPAP,
is 72,000 individuals, and that is for lower and moderate-income
seniors that have received services from the Commonwealth to help
with prescription benefits.
In addition, I would also say, and I think this is important to
note, that there is about 700,000 elders in Massachusetts that will
now benefit by having prescription Part D available to them.
In anticipation of Part D, we anticipated certain transitional
issues that would occur with the program, and prior to January 1,
the legislature passed and the Governor signed a bill that accomplished a couple of things. One was for a formulary assistance, and
while we recognize that the Federal requirement did have a 30-day
transition, we wanted to backstop that and make sure that that
would be available, so the State agreed that that would pick up if
someone went and changed to a new insurance product and a particular drug was not included, that the pharmacist could fill that
prescription for 30 days and that the Commonwealth would pick up
that cost. In addition to that, we also did a cost sharing assistance
and such that we took down the copays on Part D to what they had
been historically under the Medicaid program in Massachusetts. So
we had done that in advance just to make sure that as we were
moving to a new system, which we were very excited about, that
we would not have issues with a number of our participants.
I would note on page four that we did, unfortunately, experience
more transitional issues than we had anticipated. Our Office of
Medicaid in 2002 established a Pharmacy Advisory Council. We
work very closely with a lot of the major pharmacies within the
Commonwealth to ensure that when we are delivering services
through the Medicaid program, that it is done in the most effica-

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00111

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

108
cious way possible. We have had historically challenges with that,
and I think through the work of Director Waldman and Paul Jeffrey that we have come a long way in Massachusetts.
So we were watching very closely as soon as the Medicaid Part
D launch date of January 1 hit to have a good understanding of
what was going on within our community, and what we did find
was that a number of dual-eligibles were experiencing great difficulty being able to fill prescriptions, specifically, and you have
heard this all today so I dont want to spend too much time on it,
but there were issues about overcharging of copayments, extensive
system glitches.
I think that this is one thing that CMS has been working hard
on to fix, but data matches and the hand-offs between States to the
Federal Government to the various plans, obviously, a number of
complications. So people werent seen within the systems when
they were going into the pharmacies. Particularly, you had situations where individuals were signing up for the benefits or being
auto-enrolled in the last week of December and then showing up
the first day of January looking for a service and that was very difficult for individuals.
In addition to that, numerous phone calls from consumers, their
families, from pharmacists, from doctors spending a great deal of
time on the phone trying to talk to plans, you know, 30 minutes,
60 minutes, and obviously in the early weeks that was very challenging. So we did have situations where people were leaving pharmacies without drugs.
On page five of the presentation, Governor Romney, after kind
of surveying what had occurred during the first week in January,
directed myself and the Office of Medicaid to put in place a system
such that people would make sure that there was a seamless transition to Medicare Part D, and primarily what we did, both for the
dual-eligibles and for people who were on the SPAPs, was that we
would step in as a primary payor. If you will, we lifted the edits
in our system such that pharmacists could then go and bill our
Medicaid program. Those emergency measures went into place on
January 7 for the Medicaid program, on January 11 for our SPAP
program, and then we were encouraging the pharmacists and working with our council for them to bill Part D and also to use the
Wellpoint system. But we did allow them to use the Mass Health,
our Medicaid program, as a primary payor.
I am pleased to report, however, that conditions are improving
since we instituted these emergency measures. Through the countless hours of work of our program with consumers, with pharmacists in particular, we have been able to make dramatic improvements in such that what we have been able to do on January
26 is we have changed what the emergency measures that we are
taking. So we are no longer allowing Medicaid to be, if you will, the
first payer. We are making sure that the pharmacists are required
to use the Wellpoint system or to bill the Medicare Part D plans,
and they have to do that first before they are able to come to us
on our program as a payor.
On page seven, I think that there is some interesting data that
I would like to share with you that demonstrates the effectiveness
of what we have seen. What we did is we took snapshots of Janu-

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00112

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

109
ary 9, January 23, and January 31 to see where we were, and we
looked at claims submitted to the Part D program, how many
claims we paid, and then what was our average cost of a claim.
So as an example, on January 9, we had 43,400 claims submitted
to our plan. By the time January 31 rolled around, after we had,
if you will, lessened the emergency measures by putting some edits
back into our system, only 18,200.
In addition to that, our claims paid declined from 35,000 on January 9 to 5,000 claims on January 31, and our average cost per
claim went from $45 on January 9 all the way down to $12 on January 31. So I think what we are seeing is that there are clearly
systems issues that have occurred. CMS has been working very
closely with us at the regional level in Boston and at the national
level, our team at Medicaid has been working very closely with
them to identify specific issues for individuals, systems issues for
our total program, and they have been responsive.
I would note that on January 25, Secretary Leavitt flew up to
Boston, sat down with Governor Romney and myself to explain
where he saw where the problems were, to talk about the demonstration project they were going to put forth as fixes for the Medicaid Part D roll-out. It is refreshing in that both Secretary Leavitt
and the folks at CMS are stepping right into this, understand what
the issues are, trying to work with the States. We obviously want
to have a constructive engagement with them. We obviously would
like to be reimbursed for the costs that we have incurred, and so
we are hopeful, of course, that that will happen.
Just some more facts just to give you a sense of what we have
experienced in Massachusetts. Since we put emergency measures
in place for the dual-eligibles, we have paid over 400,000 claims
that would have been under the Medicare Part D. The total value
of those claims, $16 million, and we have serviced 100,000 unique
members of our 190,000 individuals on the Medicaid program.
Smaller information, or smaller numbers, I should say, for our
SPAP but also equally as important to convey to this committee.
I would say in closing, Mr. Chairman, that we recognize that
there have been significant issues that have occurred as part of
this transition. We knew that some of those would happen. This is
a massive system changeover, and for those of us who do this for
a living in terms of dealing with large health care programs, when
you are changing over IT systems and starting huge new programs,
you always go through this. We also recognize that at the individual level, these are very stressful circumstances when you are
looking to get prescription drugs and you go in and you are not
found within a system. People have an expectation when something
worked on December 31, why doesnt it work on January 1? We
need to pay attention to that and make the right type of steps to
remedy those situations.
Again, I think HHS and CMS have worked very closely with us.
I know that they take this serious. We are looking forward to having a good dialog with them, and I would just suggest in closing
that we want to make sure that the timeline and the process for
reimbursement is easy for the States. We believe that we are being
helpful in this transition and we need to have that recognized. We
want to make sure that in the demonstration project that it is well

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00113

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

110
defined as to what the administrative costs are to be reimbursed.
Make that very clear for us so that we can get timely reimbursement back from the Federal Government.
We would propose that the February 15 date be a date to aim
for, but one that people need to take into consideration to see
where we are at that particular time and that the SPAPs also do
get reimbursed.
I thank you for your time.
The CHAIRMAN. That is excellent testimony. I hope that, based on
what you have heard at this hearing today and your experience in
Massachusetts, you are optimistic. That is my sense.
Mr. MURPHY. Yes, I am.
The CHAIRMAN. You wouldnt scrap the program?
Mr. MURPHY. No. I mean, I would just state that we obviously
have a number of folks on Medicaid, 190,000, who are receiving
this benefit. But I think sometimes lost in the conversation are the
700,000 other seniors and disabled within Massachusetts that this
is a new benefit and it will take some time for those people to recognize that through more education, but I know that Governor
Romney and I find that to be particularly exciting.
[The prepared statement of Mr. Murphy follows:]

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00114

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00115

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.053

111

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00116

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.054

112

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00117

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.055

113

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00118

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.056

114

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00119

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.057

115

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00120

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.058

116

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00121

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.059

117

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00122

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.060

118

119
The CHAIRMAN. Senator Kohl, do you want to introduce Ms. Sutter?
Senator KOHL. Yes. We are very pleased to have Sue Sutter from
Horicon, WI, with us today. She and her husband own two rural
community pharmacies and Sue is the President-Elect of the Wisconsin Pharmacy Society, so we are delighted to have you and are
excited to hear your testimony.
STATEMENT OF SUSAN SUTTER, PRESIDENT-ELECT,
PHARMACY SOCIETY OF WISCONSIN, HORICON, WI

Ms. SUTTER. Thank you, Senator Kohl. Good afternoon, Chairman Smith, Senator Kohl. Thank you for conducting this hearing
and for providing me the opportunity to address you.
Yes, I am Susan Sutter and I am very proud to be a pharmacist
and proud to be from Wisconsin. My husband and I have both been
practicing pharmacists and own these two pharmacies in Horicon
and Mayville, which are approximately an hour from Madison and
Milwaukee, for over 25 years, and I am the president-elect of the
Pharmacy Society of Wisconsin, which is the States professional
society of pharmacists.
When it comes to Medicare Part D, I have been asked, which side
am I on? It is critical for your consideration of my comments today
to understand that my husband and I, as well as our pharmacist
colleagues, are on the side of our patients. Pharmacists and seniors
have been frustrated together with the rocky start of this new program.
It is important to emphasize that the provision of a pharmacy
benefit for Medicare recipients is a valuable addition to the health
care of everyone enrolled in the program, especially those without
prior prescription drug insurance. However, implementation and
use of the Part D benefit has been an enormous challenge for everyone involved. Calling these challenges merely glitches diminishes what tens of thousands of pharmacists and pharmacy technicians have had to do in our attempt to provide medications to our
patients when the system has not worked the way it is supposed
to work.
CMS has worked diligently to address many of the Part D problems and some have lessened, but significant problems remain and
millions of seniors are yet to enroll in the program.
I wont waste your time today pointing fingers. Rather, my appeal to you is to acknowledge that the problems exist and for you
to demand that they be corrected immediately.
I will begin with the complexity of the program. It must be made
easier to understand, easier to enroll, and easier to use. I recognize
that cant happen overnight, but steps to simplify and standardize
the Part D program can and should begin in earnest.
As part of my written testimony, I have provided for your consideration a list of 15 specific problems and 15 corresponding recommendations for resolving those problems. Time does not permit
me to review this list, but please consider it a pragmatic tool for
making Part D work. Some of the solutions I have outlined must
be implemented by the prescription drug plans, some may require
changes at CMS, and others may require Congress to act, but each
deserves serious consideration.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00123

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

120
The health care needs of Medicare patients are as diverse as
their last names. Because PDPs have built their programs on
norms, many of those diverse needs are not being met. For example, discharges of some hospitalized patients are being delayed because their at-home medications cant be authorized. Thousands of
seniors at home in assisted living facilities, mental health clinics,
have lost the special packaging of medications they relied upon to
take their medications safely and correctly because a PDP wont
authorize these packaging. These examples are prevalent and they
have significant cost and quality of care consequences.
I have been surprised to see that CMS makes requests, not mandates, to the PDPs to get the program right. I think that is unacceptable and perhaps so does CMS. It appears that CMS does not
have sufficient authority to regulate PDP policies and activities.
They should be given that authority and they should use it, and
there should be significant financial penalties assessed to the PDPs
when they fail to perform.
To illustrate this point, after learning of coverage problems in
the first week of January, CMS asked for a second time that all
PDPs remove prior authorization requirements and allow a 1month transitional supply of each medication for every Part D enrollee. Some plans have complied with this request, but many have
left various hoops and hurdles in place to make it overly difficult
to provide essential medication therapies. Insurance plan rules
have overruled patient needs and it should be the other way
around. This burdensome process must change.
Medicare Part D was created so that recipients would be properly
treated. In closing, I must emphasize that the nations pharmacy
providers must also be fairly treated. It hasnt happened and it
wont unless Congress steps in. We pharmacists simply want to
care for our patients and be paid for the services we provide. Rather than recognizing the valiant effort and sustained contribution of
the nations pharmacists over the past week, the Part D benefit is
undercutting the financial viability of the very pharmacy infrastructure that it depends on.
I look forward to your questions and I ask for your leadership
and resolve in ensuring fair treatment both for recipients and the
providers of the Part D benefit. Thank you.
Senator KOHL. Thank you for your testimony.
[The prepared statement of Ms. Sutter follows:]

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00124

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00125

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.061

121

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00126

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.062

122

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00127

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.063

123

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00128

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.064

124

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00129

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.065

125

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00130

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.066

126

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00131

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.067

127

128
Senator KOHL. I have just one question I would like to ask you.
I am sure you have experienced, as other small and medium-sized
pharmacies in Wisconsin and across our country have, going to the
length of having at times to take out lines of credit or to extend
credit for which they dont have the resources and shouldnt be
doing it, but to see to it that their patients are served. What has
been your experience and what do you suggest we do to remedy
this situation as quickly as possible?
Ms. SUTTER. Certainly. There are a number of financial things on
different levels. First of all, the amount of time, uncompensated
time, the work that we are doing administratively within these
pharmacies because of what was not set up properly and proper
training at the PDPs, we have hundreds of hours across these
pharmacies and across the country. In addition to that, pharmacists like ourselves have given free drugs, medications, to our
patients with the hope and understanding that we will get some
type of reimbursement. Certainly other pharmacies, and I have
heard it a great deal in the last week, have gone to the point of
needing line of credit because most of our wholesaler bills are now
due.
That is only the first line of the financial issues. Senator Lincoln
earlier commented about the issues with the contracts with the
PDPs. It is take it or leave it. Yes, there are rural pharmacies that
can use the access requirement to possibly get negotiations with
these PDPs, but we still have two. One of our pharmacies meet
that access requirement. We have two that have not negotiated in
good faith to contract with us.
But I also want to state, there are pharmacies in the urban area
where the density requirements or the access requirements, you
are still asking patients to change pharmacies. One of the things
that I hope that everyone understands, having gone through what
they have gone through in this first month, is that many, many,
many of these patients have patient-pharmacist relationships and
you are taking away their choice of staying with the pharmacist
that they trust. These contracting problems that we are having,
they may have a certain set of pharmacies in an urban area, but
they have to leave the clinic pharmacy that they have a relationship or a specialized pharmacy through a health system that they
have been using.
So as we address those issues, I want you to understand that the
contracting, the overall contracting issue is going to be an ongoing
financial issue for us.
Senator KOHL. Thank you. Your testimony, your experience, the
kind of perspective you bring to this issue is really important to
this committee and I appreciate very much your coming here today.
Ms. SUTTER. Thank you, Senator.
The CHAIRMAN. Tim, you just heard Sues testimony. Is that familiar to you in Massachusetts?
Mr. MURPHY. Yes. It was interesting, because when other folks
were talking about that today, I turned to Paul and asked, what
have we heard in Massachusetts, and it is a little different in that
it is clear that a number of pharmacists have given free drugs to
folks to kind of, if you will, tide them over while they were trying
to find and identify them within the system. I think in Massachu-

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00132

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

129
setts, because we acted so early, though, in terms of, if you will,
turning the edits off of our Medicaid system to allow people to bill,
that we were able to address this problem such that our pharmacists arent in the same situation that you are hearing from
other parts of the country today, and so we havent heard situations of people taking lines of credit or things like that, and I
would turn to Paul just to make sure I am not overstating that
case. It is consistent.
The CHAIRMAN. Sue, you had many good ideas there and we will
continue to push them. Thank you.
Ms. SUTTER. Thank you.
The CHAIRMAN. Mark Ganz, Regence Group, Oregon. Welcome.
STATEMENT OF MARK B. GANZ, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, REGENCE GROUP, PORTLAND, OR; ON
BEHALF OF THE NATIONAL BLUE CROSS AND BLUE SHIELD
ASSOCIATION

Mr. GANZ. Thank you, Chairman Smith, Senator Kohl, for the
opportunity to testify about an issue that touches so many. My
name is Mark Ganz. I am president and chief executive officer of
Regence Blue Cross Blue Shield, a taxable not-for-profit health insurer. We are one of the oldest plans in the country and the largest
in our region, serving over three million people in Washington,
Idaho, Utah, and Oregon.
Regence has been serving Medicare beneficiaries since the program began in 1965, so we know a lot about their needs and their
expectations. To make Part D a success, we knew it would take
one-on-one, face-to-face engagement, a huge investment of people
and resources for our company. So it was only after careful deliberation that we decided to take on this challenge.
A key reason that we got involved with Part D was that we knew
we could save seniors money on their medications. Regence operates one of the few in-house not-for-profit pharmacy benefit programs in the country. Our nationally recognized program has saved
our members more than $370 million in drug costs over the past
5 years. We were, quite frankly, very excited about the opportunity
to expand these savings to Medicare beneficiaries.
Also, I had personally experienced the plight of beneficiaries who
existed without drug coverage. My mother has been spending more
than $8,000 a year on drugs, paying full price at the pharmacy.
She called me for help on Part D and we spent a few hours going
over her drug list and different plans to see which might work best
for her over the Thanksgiving holiday. As a son, it was a humbling
reminder that this person who once took care of me now needed me
to help take care of her. Thanks to the Part D program, she will
save at least $4,000 a year. That is a big deal for her as she approaches 80 and beyond. For me, that is what this program is
about.
We all share a commitment to Americans who need Part D and
need our help to make it work for them. This commitment is what
has guided our service to seniors for more than 40 years and is precisely how we approached our implementation of Part D, one person at a time.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00133

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

130
So what did we do to gear up for Part D? First, we prepared ourselves, our partners, including all of the pharmacists, and our
members for what was coming. We reached out to them early and
often.
Second, we did our best to anticipate the inevitable problems and
glitches. We developed what if scenarios so we could identify
risks and develop solutions ahead of time.
My written testimony outlines the proactive steps we took beginning last summer. Let me simply say that it was a massive mobilization effort that required an all hands on deck attitude at our
company, and our planning has largely paid off.
Even so, when October 15 arrived, we were immediately
swamped. The response to this program was far beyond anything
we had anticipated. Here are just a few examples.
In 1 month, we have enrolled 63,000 people, more than three
times the total we enrolled in that market segment the prior 2
years combined.
Call volume to our government program line has more than tripled, from 12,000 to over 40,000 per month. Many seniors have
called us ten, even 20 times for advice.
At the nearly 300 seminars and outreach sessions that we did,
we engaged more than 17,000 people personally who wanted to get
advice and answered questions, and I personally was engaged in
some of those outreach sessions.
So how are we doing today? Overall feedback has been positive
from our State governments, from pharmacies, and from our members. I dont want to mislead you. We have not been perfect. We
have had our share of problemsfortunately, not with my mom,
yet, although I am sure I will hear from her if we do.
But our primary objective has remained intact. We give seniors
the benefit of the doubt if any question arises and we tell the pharmacies, fill the prescription. We will pay you. We are taking the financial liability, and if we end up overpaying, we do not intend to
go and seek the reimbursement. We are just paying it now. We will
sort out the discrepancies later. As a result, Regence members are
getting their medications and they are calling to say, thanks for
being on their side.
Here are a few more numbers. As of January 23, we have filled
120,000 prescription drug claims. As of January 20, we had paid
out to pharmacies $7.5 million in medication claims.
While we are proud of our success, we are not sure that that performance is all that unusual. We believe that the health care industry has been working hard to help people through this major
transition. During the moments of frustration, it might be tempting, even satisfying, to focus on the flaws and point the finger. But
for those of us on the front lines, it is more important right now
to persevere, work with our partners to solve problems, and keep
a laser focus on the people we are here to serve.
Any human endeavor, especially one that involves 43 million
Americans, will have challenges and have human errors. At
Regence, our goal has been to minimize problems and maximize access and personal engagement, one beneficiary at a time. We think
it is working and the effort is worth it for our members.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00134

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

131
So on behalf of the 5,500 Regence employees that I am here representing, I am honored to share our story with you. Thank you for
inviting me and I am happy to answer any questions.
[The prepared statement of Mr. Ganz follows:]

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00135

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00136

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.068

132

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00137

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.069

133

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00138

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.070

134

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00139

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.071

135

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00140

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.072

136

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00141

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.073

137

138
The CHAIRMAN. Mark, your very insightful and helpful testimony
is particularly memorable regarding your mom. Do you at Regence
find that you are able to work with the seniors to get through the
frustration and get them enrolled? Do they appreciate the amount
of savings that are there for them? I mean, your mom, I am sure,
is aware that there are $4,000 annual savings available to her.
Mr. GANZ. Right. I think it is early on, so I think that the appreciation will increase as people see the actual savings and can compare it to the full price they have been paying in the past, because
they are not only going to get coverage, but they are also getting
the benefit of a greater focus on generics and other things that will
actually help lower their costs. So I think that that will increase
over the year. I mean, we are very early on in this program.
But yes, I think the main thing we have heard from seniors is
they have appreciated the personal outreach. That is how they like
to process. That is how they learn. They are not going to learn it
from just getting a brochure in the mail. They need to really go
through it.
The CHAIRMAN. Our thanks to all three of you and our other two
panels. You have added measurably to our Senate record and we
clearly understand from you that it is not perfect, but it can get
a lot better if we keep working on it. So thank you and thank you,
Senator Kohl. I think this has been a very informative hearing for
all members.
We are adjourned.
[Whereupon, at 1:09 p.m., the committee was adjourned.]

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00142

Fmt 6633

Sfmt 6633

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

APPENDIX
PREPARED STATEMENT

OF

SENATOR LARRY CRAIG

Thank you, Mr. Chairman, for convening this important hearing to assess the implementation of the new Medicare Part D prescription drug program. I think one
month into the roll-out of the program is an opportune time to reflect on the
progress we have made, the short-comings we have already identified and to discuss
possible solutions to some of the problems we face.
I do not want to suggest that all of the news surrounding this program is unfavorable. In fact, just the opposite is true. I think the American public has a lot to be
proud of when we look back on our first month. CMS is reporting that over 1 million
prescriptions per day are being filled for our nations most vulnerable citizens. In
additioncontrary to many predictions at the time of enactmentdozens upon dozens of companies are participating in a market-based system to provide medications
to tens of millions of citizens. In my own State of Idaho alone, there are 19 different
companies offering over 40 plans from which beneficiaries can receive prescription
medications at significant discounts. One of those providers, The Regence Group, is
here today to testify about their experience in implementing this important new program. I want to thank them for their willingness to come and offer their perspective
and advice.
Of course, not all of the news is good either. As I mentioned at the outset of my
statement, a few serious short-comings have been identified in the implementation
of this program, particularly in the transition of our Medicaid patients from state
coverage to Medicare coverage. This complicated transitional period has been
weighed down by a lack of understanding at the retail pharmacy and consumer level
as well as a lack of timely and helpful service at the industry and governmental
levels. Pamphlets and mass mailings are important. But, I think most of you would
agree there is no substitute for one-on-one human interaction where questions can
be posed and answered correctly. I know CMS and industry have been training call
center employees for months and recently have even increased their call center efforts. That is a welcome and important step. Now, it is time to pass on the best
available, most accurate information to our beneficiaries, pharmacists, and providers.
Mr. Chairman, just three years ago, Congress and the President set out on a bipartisan mission to provide affordable prescription medications to Americas seniors
and Medicaid-eligible citizens. Together, we put our best efforts forward, forged
many compromises, and to a large degree have accomplished what we set out to
achieve. Is our program perfect? No. But, I believe that constructive reviews, such
as this hearing, coupled with the best intentions of the American people will ultimately perfect this program for the betterment of all of our deserving seniors and
citizens in need.
Thank you again, Mr. Chairman.
PREPARED STATEMENT

OF

SENATOR SUSAN COLLINS

Mr. Chairman, thank you for holding this hearing to discuss critically important
issues related to the implementation of the Medicare Part D drug benefit.
The addition of a prescription drug benefit represents the broadest expansion of
Medicare since the programs inception in 1965. This important new program has
the potential to provide prescription drug coveragefor the first timeto more than
11 million Medicare beneficiaries who previously had to pay for their prescriptions
out of their own pockets. Moreover, the program has the potential to improve coverage for millions more who had coverage that was less generous than the new Part
D benefit.
Unfortunately, however, the implementation of this new benefit has been fraught
with serious problems and missteps. Given the magnitude of the new program, I
(139)

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00143

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

140
think that everyone anticipated some start-up difficulties. But it is now evident that
the Centers for Medicare and Medicaid Services has made some major errors and
miscalculations. Of particular concern is the fact that some of our poorest and sickest seniors are the ones who have had the most trouble with the new benefit. We
must therefore make every effort to identify and rectify these problems as quickly
as possible.
I understand that CMS has taken some steps to address a few of the problems
that have been identified. For example, they have dramatically increased the staff
at the call center for pharmacists, and they have also improved the speed and accuracy of the E1 computer system that can be used to check a beneficiarys enrollment. The Committee will be hearing later from a pharmacy representative who I
hope will tell us whether these changes have made their jobs any easier.
Maine was the first state to step in and say that, if a pharmacist is unable to
confirm that a Medicare beneficiary is enrolled in a Part D plan because of a computer glitches or another problemthe state will cover the costs of the drugs. Governor Baldacci is to be commended for stepping in to provide this safety net, and
I am committed to making sure that my State is not saddled with millions of dollars
in costs due to the federal governments problems in implementing the new benefit.
Secretary Leavitt has given me personal assurances that Maine will be reimbursed for the money it is spending to prevent any disruption of benefits for our
seniors. I have also joined a bipartisan group of my colleagues in introducing legislation that would require the Department of Health and Human Services to do so.
As problematic as the start-up has been, this new Medicare benefit has the potential to provide much-needed relief from high prescription drug costs, particularly for
those seniors and disabled individuals who previously had no coverage at all. It is
therefore imperative that we work together to identify problems quickly and make
the changes necessary to make the program work.
Again, I want to thank the Chairman for calling this hearing.

PREPARED STATEMENT

OF

SENATOR RUSSELL FEINGOLD

I thank the Chairman for holding this hearing today. The implementation of the
Medicare Prescription Drug Benefit has been of great concern to me as well as my
constituents in Wisconsin, and I am pleased that the Committee on Aging is examining some of the serious problems that have occurred since January 1st of this
year. I am also pleased that Senator Kohl has invited Sue Sutter, a community
pharmacist from Wisconsin, to come and testify before the committee today. Sue and
her husband, John, own two pharmacies in Wisconsin, and I know that she will provide a much-needed perspective on the effects of this program on independent pharmacies in rural communities.
Supporters of the Medicare Prescription Drug Benefit have touted it as the vehicle
that would supply affordable, easily accessible prescription drugs for seniors. The
program has so far fallen far short of that goal. The outcry that I have heard from
pharmacists, beneficiaries, and health care providers over the past few weeks makes
clear that the implementation of the program has been a disaster. This program has
not provided either affordable or easily accessed drugs to many Medicare beneficiaries. Instead it has presented providers and beneficiaries with frustration, confusion, expensive medications, and sometimes no medications at all. It is unacceptable for individuals to go without life-saving medications, yet this is what has been
happening in Wisconsin and across the country since this program commenced.
Since the beginning of January, I have received panicked phone calls from people
in my state saying that they were unable to receive drugs that they had been routinely getting at their pharmacy every other month. Many calls were from people
who could not receive essential drugs such as insulin, anti-psychotics, or
immunosuppressants for transplant patients. At the same time as I was hearing
from people suffering from pain because they did not receive their pain medications,
I received press releases from the Centers for Medicare and Medicaid that expressed
satisfaction with the launch of the program, and boasted on the millions of participants in the program. There may be millions participating in the program, but too
many of them cannot receive their drugs and too many pharmacists are unable to
comply with the complicated regulations in the program. CMS should be focusing
its efforts on addressing this emergency rather than disseminating public relations
messages.
I hope that this hearing will provide a forum in which important questions will
be answered, and that solutions will be found to the multi-faceted troubles that
have occurred as a result of this program. I have written Secretary Leavitt and Dr.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00144

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

141
McClellan repeatedly to voice my concern about Medicare Part D, but I have not
yet received a single response.
Some of the problems that I hope are addressed by the administration today include the supposed contingency plans for implementation that have failed. The transitional plans offered by the private drugs plans have often been inadequate. While
a 30-day supply of drugs has been encouraged by CMS, it has not been required.
I think it is time that CMS remember who this plan is supposed to serve: the people, not the drug and insurance companies.
I also hope that the many problems regarding dual eligibles are addressed in this
hearing. I was disheartened to learn that some beneficiaries had to pay for their
drugs on their credit cards, their only other option being to go without their medications. Those with little income will be paying for these drugs for months, with interest, and this is a sad burden for the federal government to place on the neediest
in society. Other dual eligibles are entirely without drugs or have had gaps in their
treatment. This is unacceptable, and I hope this is addressed today.
Additionally, I hope that CMS will properly address the issue of reimbursement
for the state governments. Many states, including Wisconsin, came to the aid of the
public when the federal government would not by enacting emergency provisions.
Now, these states are depending on the federal government to act responsibly and
reimburse them for funds that were spent out of tight state budgets. To date, the
administration has put in place a complicated system that forces states to bill various private drug plans. This is an undue burden for states short on cash and personnel, and I hope that CMS will provide an adequate alternative.
We cannot sustain a great nation if we do not care for our elderly, sick, disabled,
and home-bound. These are the people this drug plan is supposed to be serving, and
I fear that they have been dismally let down the past month. Let us not wait any
longer. There is an opportunity at this hearing to find solutions, and I hope that
this opportunity will be seized by my colleagues and the administration.
PREPARED STATEMENT

OF

SENATOR RICK SANTORUM

Good morning, I would like to thank the Chairman for holding todays hearing
and providing an opportunity to discuss a very important topicthe implementation
of Medicare Part D. I would also like to thank todays panelists for taking the time
to share their own experiences with the implementation of this important benefit
and their suggestions for how it can be improved. As a member who represents a
state with one of our nations largest senior populations, ensuring that my constituents have access to medically necessary prescription drugs is one of my highest priorities.
Since Medicare Part D implementation began, all of us have heard the anecdotal
reports of confusion and frustration that have stemmed from the inherent challenges of implementing the most comprehensive improvement to the Medicare program since its inception over forty years ago. As I have personally communicated
to Secretary Leavitt and Dr. McClellan, it is unacceptable if even one of our most
vulnerable citizens has encountered any difficulty in obtaining medically necessary
drugs. Any problems that have been identified since the Medicare drug coverage
began must be addressed immediately. I look forward to accompanying Secretary
Leavitt to Pennsylvania later this month so that he can see first hand what my constituents are experiencing.
The Aging Committee is taking an important first step in delving into issues related to Medicare Part D implementation, and next weeks Senate Finance Committee hearing will build upon todays discussion. Many of the questions and concerns we are hearing about Medicare Part D implementation mirror those from the
early days of implementing the original Medicare program in 1966problems which
have long since been resolved. Over the past forty years, Congress has strengthened
and improved Medicare to ensure that program has kept pace with improvements
in health care. I would caution my colleagues that hastily drafted legislative fixes
to improve this nascent program would be premature as the program is only in its
second month, and each day we are hearing positive reports of continuing improvements. Just as Congress has acted to strengthen and improve Medicare over the
past forty years, I am confident that Congress will continue to work with CMS to
act as necessary to strengthen and improve Medicare Part D. Honest discussions
such as todays are an essential step in ensuring that such improvements are the
result of a policy driven process.
Last week I received a letter from a senior in Doylestown, Pennsylvania. She
wrote, Senator Santorum, thank you for supporting the Medicare prescription plan.
Today I paid $9.60 for a 90 day supply of my hypertension medication which in 2005

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00145

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

142
cost me $45. Thanks to Medicare Part D, this Pennsylvania is not only saving on
her drug costs, but she has the peace of mind of knowing that her financial health
is protected against catastrophic drug costs. We cannot lose sight of the enormous
potential of this benefit to improve the health of millions of Americans; yet, this potential cannot be fulfilled unless the problems the program is experiencing today are
successfully resolved.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00146

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00147

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.074

143

144
PREPARED STATEMENT

OF

SENATOR MEL MARTINEZ

First, I would like to thank the Chairman and the Ranking member for holding
this critical hearing.
Clearly, the implementation of Medicare Part D has been a massive undertaking.
And, with most undertakings of this proportion, problems can and have arisen.
But we must not lose sight that the kinks in the system are being addressed and
their impact minimized more each day as the process continues to move forward.
A project of this magnitude is going to have rough spots as it starts. The goal
must be to improve and so so in a timely manner.
However, I have been greatly concerned about the impact on some of Floridas
most vulnerable population the roughly 400,00 dual eligibles that reside in the
state.
It has been reported that a portion of these low income individuals are experiencing great difficulty in gaining access to much needed medications.
To stave off a crisis situation, I am very pleased that the Centers for Medicare
and Medicaid Services (CMS) announced a state reimbursement plan for costs associated with the successful transition of dual eligible Medicare beneficiaries into their
new Medicare coverage.
Governor Bush, after consultation with Florida House and Senate leadership, also
signed an Executive Order providing authorization for Floridas Agency for Health
Care Administration (AHCA) to apply for this waiver.
Floridas temporary waiver will provide one more tool for AHCA to handle casesparticularly those in the low-income subsidy category-to transition successfully to
Medicare without the burden of unwarranted deductibles, co-insurance or excessive
co-payments.
This waiver will allow the state to focus its efforts on those who are still confronting problems and to resolve those issues as quickly as possible.
With that said, I look forward to hearing from Dr. Mark McClellan for an update
on the situation and the views of the other panelists we have here today. Thank
you.
QUESTIONS

FROM

SENATOR SANTORUM

FOR

ROBERT KENNY

Question. What advice would you offer to a Medicare beneficiary who may be reluctant to find out about or enroll in Medicare drug coverage?
Answer. The new Medicare Part D Prescription Drug Coverage bill seems to be
either liked or disked. I will not attempt to settle that argument here.
The real question needs to be, Now that it is here, should I join or not? The
answer is, Yes, join.
Yes, join even if you do not like the law, the people who wrote it are anything
else about it. Join even if you think it is big, dumb and overly complicated.
Yes, join if you spend as little as $35 a month for prescription drugs. There is
a plan that will save you money. Yes, join even if you do not spend $250 to use
the deductible. Most of us use more drugs as we age and even if you are not spending it now, there is an excellent chance you will spend much more than that in the
future. Joining now may seem like a waste of money but there is a 1% a month
additional charge if you wait to join until after May 15, 2006. Plans are available,
in our area, for as little as $6.93 a month, so it does not cost much to avoid the
stiff penalty.
QUESTIONS

FROM

SENATOR SANTORUM

FOR

SUSAN SUTTER

Question. You criticized the prescription drug plans efforts to provide support to
pharmacists-can you speak to how effective education efforts have been on the part
of CMS and prescription drug plans since January 1st? How do you believe these
efforts could be approved?
Answer. Quite frankly, pharmacists have gone from a severe lack of information
from the plans prior to January 1st to information overload from both CMS and
the plans as the challenges and problems of implementation have been identified.
Pharmacists are now faced with tons of documents from the plans which can only
be implemented if the pharmacist continues to shift their professional time to these
administration issues instead of serving their patients and their needs. The problem
with the volume and variety of information we are now receiving confirms what I
stated in my testimonythe Medicare Part D benefit needs to be simplified and
standardized.
Until the larger issue of standardizing the plan can be addressed, CMS should
be directed to clearly delineate what information CMS will provide and that which

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00148

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

145
should come from the plans. For example, CMS could define what areas of information all plans must have policies on and direct the plans to provide that information
in a concise common format for easy review for the pharmacist.
All of this written information does not help patients receive their medications if
the individuals on the plans help desk are not adequately trained or educated to
implement the plans policy correctly. After two months, some plans still have pharmacists working through a maze of phone numbers or individuals to get a problem
resolved.
Finally, let me share a personal example of obtaining information, but finding it
difficult to use the information to actually serve the patient. A patient (not a dualeligible) came in my pharmacy yesterday to have his medication refilled and presented his Part D card that he had finally received. I asked when his benefit was
effective and he stated January 1st. I offered to send his January claims to his plan
and refund any difference. I made the offer because I had read that CMS requested
that the plans open their claims processing windows (which often are only open
for 30 days or less) to accommodate this type of situation. I received the message
claim too old and confirmed through the PBMs help desk that the patient would
have to file paper claims to be reimbursed. I contacted the plans Director of Pharmacy to confirm that the plan had decided to ignore CMSs request. He stated that
the plan wants the claims to be accepted but that the PBM is saying no to the plan
and it remains a point of discussion between the plan and the PBM. In summary,
it only confuses the situation to communicate directives from CMS if the plans, or
in this case, the plans PBM, can ignore the request. Again, CMS needs the authority to mandate, not simply request, such directives to the plans.
Question. Have recent efforts on the part of CMS, such as pharmacy call-in sessions, been helpful in clarifying confusion?
Answer. Pharmacists appreciate CMSs outreach efforts but not all pharmacists
are able to participate in the call-in sessions. In addition, the session conducted on
Part B versus Part D drug coverage was very useful. However the most common
problem for pharmacists is that the Part D plans themselves are not clear on the
issue. CMS must follow through and audit the Part D plans proper coverage of
these drugs.
The most effective method CMS has used is communicating through the pharmacy
professional associations. As a member of several of these associations, I appreciate
the outreach to them.
Going forward, CMS should identify one method of communicationone spot on
the CMS website or one e-mail listservto communicate with pharmacists. If such
an effort was made, pharmacists would know there was a simple, quick way to find
information on Part D and look for updates.
Thank you for your interest in the challenges pharmacists are facing with the implementation of Medicare Part D.

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00149

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00150

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.075

146

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00151

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.076

147

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00152

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.077

148

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00153

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.078

149

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00154

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.079

150

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00155

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.080

151

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00156

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.081

152

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00157

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.082

153

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00158

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.083

154

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00159

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.084

155

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00160

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.085

156

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00161

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.086

157

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00162

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.087

158

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00163

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.088

159

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00164

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.089

160

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00165

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.090

161

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00166

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.091

162

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00167

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.092

163

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00168

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.093

164

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00169

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.094

165

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00170

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.095

166

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00171

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.096

167

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00172

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.097

168

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00173

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.098

169

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00174

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.099

170

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00175

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.100

171

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00176

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.101

172

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00177

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.102

173

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00178

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.103

174

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00179

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.104

175

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00180

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.105

176

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00181

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.106

177

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00182

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.107

178

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00183

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.108

179

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00184

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.109

180

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00185

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.110

181

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00186

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.111

182

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00187

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.112

183

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00188

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.113

184

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00189

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.114

185

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00190

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.115

186

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00191

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.116

187

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00192

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.117

188

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00193

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.118

189

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00194

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.119

190

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00195

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.120

191

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00196

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.121

192

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00197

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.122

193

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00198

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.123

194

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00199

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.124

195

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00200

Fmt 6601

Sfmt 6601

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.125

196

197

VerDate 0ct 09 2002

14:36 May 19, 2006

Jkt 000000

PO 00000

Frm 00201

Fmt 6601

Sfmt 6011

H:\DOCS\27432.TXT

SAGING1

PsN: JOYCE

27432.126